Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SERVICES

Child Benefit

Sir George Young: asked the Secretary of State for Social Services whether he will make a statement on the payment of child benefit for non-resident children.

The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): Subject to EEC arrangements and reciprocal agreements with other countries, child benefit is not payable in respect of a non-resident child unless the child has previously been in Great Britain but is temporarily absent. This was also the position for family allowances.
For the definition of temporary absence I refer the hon. Member to my reply to my hon. Friend the Member for Rotherham (Mr. Crowther) on 5th May.

Sir G. Young: If the Minister accepts that the costs of those with the responsibility of bringing up families are higher than the costs of those without such responsibilities, what is the moral argument for not extending the new child benefit to 200,000 families with non-resident children?

Mr. Deakins: We are adopting the same policy on child benefit as we did on family allowances. The scheme is a replacement of one cash benefit by another cash benefit. Family allowances were not paid in respect of children living abroad. We are operating the same principle with the child benefit scheme.

Mrs. Castle: I recognise the difficulties of paying child benefit to non-resident children, but does my hon. Friend

not agree that it would be grossly unfair to withdraw the child tax allowance from those who cannot get the benefit of the child allowance for their children overseas? At the least, until such parents have had a full opportunity to bring these dependent children over here if they wish to do so, will my hon. Friend postpone the cancellation of child tax allowance for these children?

Mr. Deakins: Child tax allowances are a matter for my right hon. Friend the Chancellor of the Exchequer. A concession has been made on those allowances for the current financial year in Clause 23 of the Finance Bill. An announcement about future years was made by the Financial Secretary on 1st April.

Mr. Patrick Jenkin: Since, when this policy was discussed in June last year, the Secretary of State accused me of wanting to leave 200,000 families positively and sharply worse off, will the Under-Secretary of State ask his right hon. Friend to withdraw his criticism—or does he now admit the charge?

Mr. Deakins: I am sure that my right hon. Friend can deal with that charge. Those families will not be sharply worse off, because of the concession that is being made by the Government in the current Finance Bill.

Mr. Kenneth Clarke: Does the Minister accept that these families will be made sharply worse off as soon as the Government's decision to phase out tax allowances is finally put into effect? Does he agree that as child benefit is a combination of family allowance and child tax allowance, making child benefit not payable is sharply discriminatory to heads of families who happen to have children abroad?

Mr. Deakins: We have made a special concession on child tax allowance for non-resident children for the present financial year. Thereafter they will revert to the child tax allowance that is appropriate to other families in this country. We have tempered the wind to the shorn lamb for the present financial year.

Mr. Hall-Davis: asked the Secretary of State for Social Services whether it is administratively possible to begin the full


child benefit in April 1978 instead of waiting until 1979–8.

Mrs. Chalker: asked the Secretary of State for Social Services whether he will increase child benefit rates in November 1977.

The Secretary of State for Social Services (Mr. David Ennals): It would be administratively possible to begin the full child benefit scheme in April 1978, but our intention is to continue with the phasing in of the full scheme over the period up to April 1979 in line with the recommendation of the Joint Labour Party-TUC Working Party.
Child benefit will not be increased in November 1977; it is to go up in April 1978 in accordance with the next phase of the transfer of family support from child tax allowances.

Mr. Hall-Davis: Does the Secretary of State recognise that the position of families with children is relatively worse now than when this Government came to office, and that the increase in bread and milk prices in the past seven days will further aggravate family poverty? Is not the Government's record over child benefit one of a complete lack of courage and concern for married couples with children, on whom inflation falls particularly hard?

Mr. Ennals: Whatever the hon. Member may say, when his Government were in power child benefits were not introduced. I am very proud that this Government have fulfilled their pledge and have introduced child benefits, which will be the foundation of family support for years to come.

Mrs. Chalker: Does the right hon. Gentleman accept that large increases in unemployment dependency allowances for children, by comparison with the small increases in child benefit, will make it more worth while for many family men with children to be unemployed than employed? Will he talk to his right hon. Friend the Chancellor about putting this state of affairs right so that we have a proper family policy?

Mr. Ennals: I believe that we have a proper family policy. The number of people for whom it is any advantage at all to be unemployed as opposed to being in employment is very small indeed. This is one of those canards that the

Opposition have flogged around the country. It is absolutely untrue, and it does a great deal of damage.

Mrs. Castle: Is it not a fact that since the working party produced its compromise report for phasing in child benefit the Chancellor has made £1,800 million available for tax reliefs which do not benefit children at all? In that situation, will not my right hon. Friend fight for an earlier increase in child benefit and, at the very least, for the automatic up-rating of child benefit in November with the rest of the benefits?

Mr. Ennals: I can assure my right hon. Friend that I want to see the most substantial increase in child benefit that is possible in April next year. The possibility of an increase in November is simply not on, but I hope that next year we shall see a substantial increase, which will show the full significance of child benefit as introduced in this House.

Mr. Wigley: Will the right hon. Gentleman urgently review the special cases that are worse off in absolute terms as a result of the child benefit scheme, concerning which I have already written to his Department?

Mr. Ennals: I shall examine the correspondence that has come from the hon. Gentleman. If we take into consideration the tax remissions in the Budget, there is no one who is actually worse off in this context. There were some high taxpayers who were marginally worse off as a result of the child benefit scheme, but they will be marginally better off as a result of decisions already announced by my right hon. Friend the Chancellor.

Personal Social Services (Expenditure)

Mr. Madel: asked the Secretary of State for Social Services what will be the percentage increase in expenditure in real terms on the personal social services between 1976–77 and 1977–78.

Mr. Ennals: We are planning for an increase in current expenditure in England of about 1 per cent. in real terms and a decrease of 30 per cent. in capital expenditure. But I have increased from £8 million to £21 million the amount that health authorities may contribute to mutually beneficial social


services schemes financed jointly with local authorities. The £21 million represents about 2 per cent. of overall local authority expenditure on the social services, and that will enable spending to be maintained at about the same level as last year.

Mr. Madel: Is it not a fact that demand on personal social services is expanding at over 2 per cent. per annum? Given that there is this pressure on personal social services, is the Secretary of State satisfied that he has the right priorities between expenditure on the National Health Service and expenditure on personal social services?

Mr. Ennals: The Government planned for a 2 per cent. growth in current expenditure on personal social services. It is estimated that expenditure in 1976–77 reached the level planned for 1977–78. Because I was so worried that some services might slip, I increased by almost threefold the amount of funds available for joint financing. That has been welcomed by the local authorities.

Mr. Ashley: I recognise my right hon. Friend's difficulty, but is he aware that many local authorities are neglecting the Chronically Sick and Disabled Persons Act? Will he press all local authorities to aim at a 90 per cent. increase in expenditure under Section 2 of that Act, as envisaged in last year's priority document?

Mr. Ennals: I shall be publishing shortly the results of the consultations on the consultative document. I am concerned about the extraordinary variation in performance between one local authority and another. The Minister with special responsibility for the disabled is frequently in touch with local authorities about this. I am anxious that some local authorities, as a result of events last Thursday, may be less prepared to look after the needs of disabled people than they were before.

Mrs. Chalker: While noting that the Secretary of State has just made a totally untrue allegation, may I ask him what encouragement he intends to give to voluntary organisations and self-help groups, which are springing up all round the country, to assist in the personal social services, which we regard as the mainspring for helping people who need

the real help that we ought to give as a society?

Mr. Ennals: Bearing in mind the hon. Lady's initial comment, having read the manifestos of a number of those Conservative candidates who were successful, I think that I have every reason to express concern because of the threats about cutting expenditure. However, to deal with the main part of the question, I agree with the hon. Lady. There is a very important rôle for voluntary organisations. That is why, in the budget for this year, I have increased by 60 per cent. the amount of money available from my Department to assist voluntary organisations.

Mr. Raphael Tuck: The Conservatives say that you want to cut it.

Industrial Injury (Hardship Allowances)

Miss Joan Lestor: asked the Secretary of State for Social Services how many people are currently in receipt of hardship allowances as a result of industrial injury.

The Minister for Social Services (Mr. Stanley Orme): 142,000 people were receiving special hardship allowance on 30th September 1975, the latest date for which figures are available.

Miss Lestor: Will my right hon. Friend explain why it is that where so many of these benefits, such as hardship allowance, are linked to a medical examination, very often the allowance is curtailed before the medical examination takes place, thus meaning that the person is without money pending confirmation that he is still in need of hardship compensation?

Mr. Orme: That is not the policy of the Department. If my hon. Friend has in mind specific cases, perhaps she will draw them to my attention.

Mobility Allowance

Mr. Hannam: asked the Secretary of State for Social Services whether he has any proposals to commute the mobility allowance.

Mr. Ennals: I am hopeful that a scheme may be worked out that will enable some disabled people to use their enhanced mobility allowance for the


purchase of their own vehicle. I and my officials are assisting in every way we can to get such a scheme ready for implementation. The British Association for Disability and Rehabilitation—BADAR—recognises that such a scheme will have to be selective and cannot depend entirely on Government funds.

Mr. Hannam: Will the right hon. Gentleman make every effort to persuade the Chancellor of the Exchequer to relieve the commuted mobility allowance of taxation? In view of the 3,500 disabled people who, since his announcement last year, are no longer eligible for vehicles, will he reverse his decision to withdraw the invalid vehicle service?

Mr. Ennals: We debated this matter at some length about 10 days ago. In answer to the second half of the hon. Gentleman's question, I cannot possibly reverse the decision. I gave the reasons then for not doing so. Certainly if I were to do so many disabled people who know the dangers of the trikes, particularly for new drivers, would be very angry indeed. The hon. Gentleman will remember the very strong campaign that was run in order that we should phase out the trikes. I think that the most important thing of all is that we should be able to achieve a scheme—I am determined to add my efforts to those of my hon. Friend the Under-Secretary—that will enable the maximum number of disabled people to purchase a vehicle suitable to their needs.

Mrs. Bain: Has the right hon. Gentleman any idea when this scheme will be implemented? What is the extent of the experiments that will be initiated at these early stages?

Mr. Ennals: We are working as quickly as we can. There has been a series of meetings with what used to be the CCD and is now the BADAR in its combined form. I cannot give a date by which we shall be able to make an announcement. However, it is encouraging that other organisations are coming forward ready to help. Chrysler's scheme to enable disabled people to buy cars at a substantial discount is already in operation. British Leyland and Vauxhall will begin their schemes on 1st June. There are now negotiations with Ford, among others, and they, too, are well advanced. Therefore, from a variety of sources—and I believe that we shall find cash from

voluntary sources—a great deal is now being done.

Mr. Hooley: What progress is being made with the design and possible production of a vehicle specially designed to replace the trike?

Mr. Ennals: There is a Question later on the Order Paper on precisely that matter.

Mrs. Knight: May I put it to the Secretary of State that he fudged the issue when replying to my hon. Friend the Member for Exeter (Mr. Hannam) when he spoke about the 3,500 disabled people who would have received three-wheelers under the old rules but will not now receive them under the new rules? Does the right hon. Gentleman appreciate the frustration and let-down felt by those people when they hear of increased expenditure on the disabled?

Mr. Ennals: I say again that this question of urging that there should be increased expenditure is a little too much. The argument has been put forward that it is of great concern to people who cannot immediately now claim a trike, which they could do previously, and who have now seen the announcement that there is an increase in the mobility allowance. The mobility allowance will help precisely those who cause the hon. Lady concern, as well as many other seriously disabled people who have no possibility of driving at all. It is quite unreasonable for the Opposition constantly to press that we should put into reverse a policy that they themselves supported when it was first announced in the House.

Mr. George Cunningham: When my right hon. Friend is looking for money for this very desirable purpose, will he take a leaf out of the Foreign Office's book, because it has transpired over the last few days that the Foreign Office has been providing for its staff interest-free car purchase loans for 28 years, completely without parliamentary authority and without Parliament being told? If the Foreign Office can be caught with its hand in the till in that way, why cannot the Secretary of State get his hands on some of the money?

Mr. Ennals: I shall study with very great care the observations of my hon. Friend.

Hospital Waiting Lists

Mr. Michael McNair-Wilson: asked the Secretary of State for Social Services in which year waiting lists for National Health Service hospitals were longer than in 1976.

Mr. Ennals: I have only provisional figures, and it seems likely that in 1976 there will have been the longest lists of patients waiting and the largest number of in-patients treated.
I am determined to tackle this problem of waiting lists, which has plagued the NHS for the past 20 years. Under my supervision a report on waiting times has now been prepared with a series of constructive proposals. I am seeking the views of the health authorities, the Joint Consultants Committee and other professional bodies.

Mr. McNair-Wilson: To what extent does the Secretary of State think that the Government's cut-backs in hospital spending are causing these lists to be as long as they are? What thought has he given to keeping open the surgical and other medical facilities at small hospitals, such as that in Newbury, which appear to be having to be closed down because they do not rate as district general hospitals?

Mr. Ennals: There is a variety of reasons why the waiting list has in creased, such as the increasing elderly population and, therefore, the increasing demand for surgery in particular, and for other forms of treatment. There is also the industrial action that took place, and certainly, of course, the limitations on public expenditure—though I cannot say that in this case it is a question of cutbacks in public expenditure, because we are still in a position of growth in terms of public expenditure. However, I do not believe that the problem would be solved by any means by simply holding on to a large number of small, uneconomic hospitals. There is a wide variety of solutions to the problem. The document that I am now circulating puts forward some very constructive proposals.

Mr. George Rodgers: Is my right hon. Friend aware that a constituent of mine who is awaiting admission to the plastic surgery unit at Sharoe Green Hospital, Preston, has been advised in the last few days, by letter, that 1,500 people are

waiting for admission and that some will have to wait for a period of 10 years before they receive treatment? Is that situation not totally outrageous? What effect does queue-jumping have upon the situation?

Mr. Ennals: In answering the original Question I said that I am extremely concerned about the matter of waiting lists. It is a problem that exists in my constituency as well as in the constituency of my hon. Friend. It is at least encouraging that 90 per cent. of those on waiting lists are classified as waiting for non-urgent treatment. The situation is now improving somewhat, because the number of people awaiting admission to hospital for urgent treatment fell by 5½ per cent. between March and September 1976, so what had been a worsening situation is now a situation which, for the first time for some time, is beginning to improve.

Mr. Patrick Jenkin: Since the length of the waiting lists is in some part dependent on the level of morale in the National Health Service, is the Minister aware that medical morale is being very severely shaken by the dreadful handling of the Doctors' and Dentists' Review Body Report? This report has been leaked to the medical Press and some family practitioner committees have draft amended statements on fees and commissions. When will the Government tighten up on this sort of thing, and when will they publish the report?

Mr. Ennals: I do not follow how this question arises from a Question about waiting lists. If the right hon. Member will table a Question, I shall answer it. He touches on the subject of the morale of consultants. He should be aware that the number of consultants in post in England and Wales has increased by 3·4 per cent. in the last year, which indicates a movement forward in the National Health Service.

Pensions

Mr. Skinner: asked the Secretary of State for Social Services whether he will introduce an interim increase for retirement pensioners in the summer.

Mr. Orme: No. As my right hon. Friend has already made clear, pensions and other social security benefits will be uprated in November.

Mr. Skinner: Does my right hon. Friend agree that in this year, when we have two transition periods as a result of our entry into the EEC—which has resulted in greater increases in food prices, which particularly hit old-age pensioners—there is a cast iron case for having two pension increases instead of one? Will he tell us whether pensioners will get the £35 put forward by the TUC when he makes his announcement for the autumn increase?

Mr. Orme: I am aware of my hon. Friend's concern about this matter and, indeed, the concern of the whole House about pensioners. I remind my hon. Friend that there has been a net increase of 15 per cent. in the purchasing power of the pension since we came to office. I give him an assurance that the uprating in November will more than cover the rise in inflation.

Mrs. Knight: Will the Minister confirm that even with the 12 per cent. uprating widows and women who retire at 60 are still paying tax even though they have no income except the pension? Does he have any plans to talk to the Chancellor about this disgraceful state of affairs?

Mr. Orme: The hon. Lady knows that the Chancellor is aware of tax levels. He referred to them in his Budget and he has already done something about them.

Mr. Penhaligon: Will the pension uprating be based on what inflation was or what the Government would like to think it might be?

Mr. Orme: There is a later Question on the Order Paper on that point. The uprating will be on a November-to- November basis and will be based on whichever is higher, inflation or wage increases.

Disabled Persons (Vehicles)

Mr. Shepherd: asked the Secretary of State for Social Services what studies he has made of cars for disabled drivers in other EEC countries.

The Under-Secretary of State for Health and Social Security (Mr. Alfred Morris): A number of other EEC countries have provisions for helping disabled people to acquire cars, subject to conditions varying from one country to another. I under

stand that in most of these countries Government benefits do not include either the issue of a specialised vehicle or a cash benefit, like the mobility allowance, which is paid without conditions as to employment or ability to drive. My Department is seeking fuller information from the EEC Commission.

Mr. Shepherd: Does the Minister recognise that for two years now we have been pressing him for this information, and that the delay is causing some concern? Is he aware that the need for a replacement for the trike is a matter of considerable urgency? Will he tell the House the exact state of affairs concerning the design of the replacement for the trike?

Mr. Morris: I can assure the hon. Member that we are in touch with the European Commission on this matter. I remind him that the Director of the Central Council for the Disabled, and its successor organisation, the British Association for Disability and Rehabilitation, speaking of the British mobility allowance scheme, said that the Government had
produced a most imaginative scheme in the Mobility Allowance. The concept is much admired by Europe.
There are Questions later on the Order Paper about making specialist vehicles. I am in close touch with all developments in this field.

Mr. Carter-Jones: Many of us are concerned that as there is no one vehicle to satisfy all the needs of the disabled, the Minister should consider great flexibility in this field. Many of us feel that all those disabled people who are able to drive should be able to do so, and that to talk of one single vehicle is to hold out a false promise.

Mr. Morris: Those are very wise words. Disabled people are not standard, and to talk of providing a standard car is to make a false assumption. The point that my hon. Friend the Member for Eccles (Mr. Carter-Jones) has made is very much in my mind and in the minds of all those hon. Members on both sides of the House who think deeply about these matters.

Dr. Vaughan: Will the Minister justify the statement that was made earlier and tell us what evidence there is that disabled people do not want to see a continuation of the trike until an alternative


vehicle is available? In February this year there was a unanimous request that the trike policy should be changed. Will the Minister talk to representatives of the disabled on 17th May?

Mr. Morris: There are many claims upon us in this field. There is a very strong campaign, on safety grounds, against the invalid tricycle, and I have answered one question after another on that issue. There are people who want the trike, and my right hon. Friend has explained why it cannot be supplied indefinitely. I assure the hon. Member that I am closely in touch with organisations representing the disabled and I shall certainly see anybody representing the national organisations. In fact, arrangements are being made for me to see national representatives on 17th May.

Granny Bashing

Mr. Andrew F. Bennett: asked the Secretary of State for Social Services what evidence he has that so-called "granny bashing" is a growing problem; and if he will set up an investigation to establish the relationship between this problem and the need to care for elderly relatives.

Mr. Ennals: Domiciliary care staff are well aware of the need to be on the alert for any possible signs of ill-treatment but I have no evidence that this problem is increasing. I have, however, decided to fund a research project into the support needed by families caring for elderly relatives. I am sure that good neighbours can be an important factor in helping to provide such support.

Mr. Bennett: While thanking the Secretary of State for his announcement, I wonder whether he is fully aware that many people suffer great hardship from looking after elderly relatives for long periods, especially in areas where there is an acute shortage of geriatric beds. Will he do more to increase the supply of geriatric beds so that relatives can get a break from caring for elderly relatives, and will he see that more community support is available for caring for these elderly people?

Mr. Ennals: I agree absolutely about the need for more geriatric beds. Also, it is essential that there should be more provision for these elderly people in the community. It is interesting that in the

joint financing project a high proportion is devoted to helping people in this category. The purpose of the research is very important. There is a whole range of specific factors, such as incontinence and sleep disturbance, which provoke crises in families looking after elderly people. The research will investigate all the facts and the possibility of relieving measures, such as measures for dealing with incontinence, laundry services, sitter-in services, night sitting and night nursing facilities, and a whole range of other services to assist families who have the responsibility of caring for elderly relatives.

Mr. Speaker: I appeal for shorter questions and shorter answers.

Mr. Greville Janner: As my right hon. Friend spent much of last Friday in my constituency, did he take note of the prodigious work done in hospitals there—hospitals that are grossly under-staffed—and in domiciliary services? Does he accept that, while his research project is welcome, it is no substitute whatever for more help in the hospitals and more domiciliary care for the elderly?

Mr. Ennals: What I saw in my hon. and learned Friend's constituency was one of the finest examples of a new community hospital, which at the moment is dedicated entirely to providing support services for precisely the sort of elderly people whom we are talking about. I thought that it was a prime example of the sort of service that the Health Service can provide and is increasingly trying to provide to meet just this problem.

Death Grant

Mr. Bowden: asked the Secretary of State for Social Services what representation he has received from the National Federation of Old Age Pensioners about the level of the death grant.

Mr. Orme: Representatives of the federation urged my right hon. Friend to raise the death grant when he met them in February. Two branches of the federation have also written to us this year on the same issue.

Mr. Bowden: Does the right hon. Gentleman accept that the present level of death grant is creating great personal distress for some elderly people, particularly those who have no savings left?


It is therefore imposing a burden on their families. Will he admit that it is scandalous that there has been no increase in the death grant since 1967?

Mr. Orme: The straight answer is that this is a question of priorities. The Government have to consider this matter against pensions and other benefits. We know that the pressure is on for an increase, but this matter comes lower down the scale at the moment.

Mr. Lipton: Is my right hon. Friend aware that I have a later Question relating to this matter? Is he also aware that the death benefit is hardly sufficient to pay the tips of the men who are handling the burial? Will he please consider the urgency of increasing the death grant?

Mr. Orme: I am aware that many hon. Members, including my hon. Friend, have raised this matter with mc, but I must reiterate that it is a question of finance, public expenditure and priorities.

Mr. Boscawen: Although one recognises that this question is a matter of priorities and that it is unlikely that the death grant can be increased for everybody for a long time ahead, does the right hon. Gentleman agree that it is time that there was some selectivity and that those whose families are in receipt of supplementary benefit should be allowed an increase in the death grant?

Mr. Orme: I find it difficult to follow the hon. Gentleman's reference to selectivity. I can understand much of the pressure that I am getting from my hon. Friends on this matter, but not that from Opposition Members. They are again urging more public expenditure at a time like the present.

Mr. Donald Stewart: Does the right hon. Gentleman not recognise that for these schemes to have reality the benefits must bear some relationship to the contributions? Since the contributions have been advancing steadily over the years, is it not high time that the death grant was raised?

Mr. Orme: That is a very fair point and I take note of it. Certainly the Government want to do something about this matter when the finance is available.

Mr. Noble: Is my right hon. Friend aware that the Tory-controlled local authority in Rossendale, in my constituency, recently introduced massive increases in charges for grave spaces and that this action in itself is causing a great deal of hardship among old people who are concerned about the fact that they can no longer afford to purchase a grave space for their relatives?

Mr. Orme: I am tempted to say that that is a very grave matter. In effect, my hon. Friend has reiterated the point made by the Secretary of State earlier today about expenditure by some of these Tory authorities. When it comes to the issue, they cut vital social services.

Health Services Board

Mr. Newton: asked the Secretary of State for Social Services whether he is satisfied with the working of the Health Services Board.

Mr. Ennals: The Health Services Board is an independent statutory body and is not responsible to me for the way in which it discharges its duties under the Health Services Act. I have every confidence in it.

Mr. Newton: How many pay beds have so far been phased out and how many extra beds have become available as a result to NHS patients? Will the right hon. Gentleman comment on allegations by the Socialist Medical Association that the spaces left vacant by pay beds are being turned into storerooms and laboratories?

Mr. Ennals: On the second half of that question, the Act requires that every effort is made to ensure that the pay beds that are closed are used productively. An amendment to that effect was accepted in debates on the Bill. As for the number of beds phased out, as the House will know, I am responsible for the phasing out of the first 1,000. I have been in consultation with the health authorities. I have now completed that consultation, and authorisations will take effect as from 20th May, and I shall make a further announcement to the House about the matter.

Mr. Kilroy-Silk: Does my right hon. Friend accept that progress in phasing out pay beds from the National Health


Service has not been fast enough and that until all pay beds are eliminated from it we shall never have an equitable or efficient Health Service?

Mr. Ennals: I shall not go over the whole debate that we had. I think that I and all my hon. Friends recognise the wisdom of the measure that we passed through the House. Quite apart from the 1,000 pay beds that will be phased out by my decision, the board is now busy consulting about the first group of beds for which it has responsibility and it will be reporting to me in July.

Dr. Vaughan: Does the right hon. Gentleman accept that there is widespread and serious criticism of the way in which the board was set up and is conducting its business? Is it not clear that if it is to fulfil the requirements of the Act, it will need more time than it has at the moment?

Mr. Ennals: I do not accept that there has been any such criticism. This is a very well balanced board which has got down to its job quickly. Its members asked me whether they could have a little more time to make their first report to me, and I readily agreed. In fact, I offered them more than they asked for but they said that they did not need it. I am very satisfied that the board is doing its job thoroughly, with maximum consultation.

Retirement Age (Men)

Mr. Greville Janner: asked the Secretary of State for Social Services whether he will seek power to introduce phased retirement for men.

Mr. Orme: No, Sir. I refer my hon. and learned Friend to the arguments and costings in my Department's memorandum of last year entitled "Pension Age".

Mr. Janner: Is my right hon. Friend agreed that in principle there can be no justification for different retirement ages for men and women? Is he agreed in principal on retirement equality for men?

Mr. Orme: My hon. and learned Friend asks me about principle. Obviously the Government would want to work towards equalisation, but that will take time. This is a matter of costings. My hon. and learned Friend will have seen the sort of public expenditure that

would be needed to bring about an equal pension retirement age in the paper that we produced.

Mr. Gwilym Roberts: In the present situation, in which we are faced with long-term structural unemployment, does my right hon. Friend agree that the odds are very heavy that the job of every man who is put on pension will be taken up by someone on the unemployment register and that the net costing of such an operation would be little or nothing? If there is the long-term phasing in of a lower retirement age, and, having looked at the booklet in some detail—

Mr. Speaker: Order. This is not a time for the giving of views.

Mr. Orme: We shall learn a great deal from the job exchange scheme. Sometimes people who retire quite rightly seek other employment. We hope that when we return to full employment the problems to which my hon. Friend has drawn attention will not exist.

Mr. Marten: In the meantime, can we not make a start by offering the option of a retirement pension to those over 60 who are made redundant?

Mr. Orme: Again, the point is the cost. Pensioners would not want to take a reduced pension. If they were to get the full pension, the State would have to pay for it.

Benefits (Uprating)

Mr. Peter Bottomley: asked the Secretary of State for Social Services when the social security uprating announcement will be made.

Mr. Ennals: I will be making an announcement soon.

Mr. Bottomley: Does the right hon. Gentleman regard the review that he carried out in the previous financial year as a State secret? If so, why?

Mr. Ennals: No, it is not a State secret. I am prepared to reveal it.

Mr. Ashley: Although my right hon. Friend must get fed up with the double standards of Opposition Members who advocate savage cuts in public expenditure on the one hand and increases on the other, will he bear in mind that the proposed increases in the charges


for meals will hit some families extremely hard? Surely this should be taken into account when considering whether he is able to increase the child benefit allowances.

Mr. Ennals: I can assure my hon. Friend that in taking what must be a difficult decision on what should be the level of uprating to take place from November, I must take into account all the different changes in prices, including the price of food and the retail price index. I can assure the House that the uprating will be sufficient to restore the value of benefits that were introduced in November 1976.

Mr. Patrick Jenkin: As we were told by the right hon. Member for Blackburn (Mrs. Castle) on 29th April that the latest date to start an orderly implementation was last week if the increases were to be paid by November, why is the Secretary of State waiting? Will he give an absolute, categorical denial that there is no question of using the size of the uprating as a bargaining counter with the TUC?

Mr. Ennals: I can assure the right hon. Gentleman that I shall be making my announcement very soon. It will be based entirely on a decision taken by the Government. It will not be part of any bargaining counter. I can assure the right hon. Gentleman that he is wrong about the date. The latest date for announcing a mid-November uprating would be early in June. That would be inconvenient in view of what is likely to be the recess. I hope, therefore, that the announcement will be made before the end of the month.

Handicapped Children (Pamphlet)

Mr. Forman: asked the Secretary of State for Social Services whether he will make a statement about the recent pamphlet on handicapped children by the National Development Group.

The Minister of State, Department of Health and Social Security (Mr. Roland Moyle): I refer the hon. Gentleman to my right hon. Friend's reply to my hon. Friend the Member for Brent, South (Mr. Pavitt) on 9th March.

Mr. Forman: Does the hon. Gentleman accept that the pamphlet issued by the National Development Group strongly

endorses the recommendations of the Court Committee? Will he agree to give positive discrimination in favour of handicapped children as a matter of policy, if necessary on a joint financing basis?

Mr. Moyle: I think that I can consider all those points sympathetically. We are consulting on the pamphlet and on the Court Committee. We are giving the highest priority to mentally handicapped children and we expect joint financing to make a considerable contribution.

MERSEYSIDE

Mr. Loyden: asked the Prime Minister when he next intends to pay an official visit to Merseyside.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): In the absence of my right hon. Friend, who is presiding at a meeting of the NATO Council of Ministers. I have been asked to reply.
My right hon. Friend has at present no plans to do so.

Mr. Loyden: I ask my right hon. Friend the Lord President whether he will ask his right hon. Friend to reflect on the election results of last Thursday if he cannot visit Merseyside. Will he point out to the Prime Minister that the electorate on Merseyside, scourged with heavy unemployment, is not reacting to the Lib-Lab pact as being the ways and means of finding a solution to its problems? Will he further urge my right hon. Friend to consider the possibility of a pact with the National Executive Committee of the Labour Party and the Labour Party Conference to find Socialist solutions to the problems on Merseyside?

Mr. Foot: I agree with my hon. Friend that the results are extremely serious from the point of view of everyone on Merseyside. I can assure my hon. Friend that the Government will take account of them. They will take account of all the representations that he and others have made on the matter. We shall seek to sustain our policies for assisting, in particular, the firms on whose behalf my hon. Friend has made strong representations. I am doubtful whether we shall get any assistance on these matters from the newly-elected representatives on Merseyside.

Mr. Whitelaw: In view of the question of the hon. Member for Liverpool, Garston (Mr. Loyden), would not the right hon. Gentleman be wise to take the opportunity of going to Merseyside and meeting the architect of the Liberal showpiece on Merseyside, "Jones the Vote"? Should not the right hon. Gentleman comfort his new colleagues with the fact that both their parties had catastropic results in the Merseyside elections?

Mr. Foot: If I might use the same colloquial terms as the right hon. Gentleman, I have always preferred "Steel the Vote" to "Jones the Vote". On the whole, he has delivered it a good deal better.

Mr. Kilroy-Silk: Does my right hon. Friend accept that one of the best examples of Tory freedom in action is the manner in which Foster Plastics, of Rain-ford, in my constituency, has sold out to a competitor without consulting or considering the interests of the workers, most of whom have been callously thrown on the scrapheap? Is this not an example of Tory freedom and free enterprise, in which the interests of workers come last, and when the pawns in the takeover battles are never consulted or considered?

Mr. Foot: My hon. Friend raises matters of great seriousness. We should all be aware of the extremely serious employment situation on Merseyside. In reply to the questions of my hon. Friends the Members for Ormskirk (Mr. Kilroy-Silk) and Liverpool, Garston (Mr. Loyden) I would say that in response to the representations that have been made to us by the hon. Members for Garston, Liverpool, Walton (Mr. Heffer) and others from Merseyside on the cases of individual firms, asking for Government intervention and Government money, there has been a considerable amount of intervention and a considerable amount of money has been supplied. But that is contrary to the policies preached by those who have temporarily taken power in Merseyside.

Mr. Hunt: Will the Lord President advise his right hon. Friend that the anti-Labour feeling in Merseyside is due to a rejection of Socialism, which is shown by

the two-thirds majority that the Conservatives now hold? Do the right hon. Gentleman and his right hon. Friend realise that the rejection of Socialism has occurred because there are now no jobs on Merseyside? What hope can he give to school leavers in my constituency that under this Government there is a chance of their getting a job when they leave school?

Mr. Foot: If it had not been for intervention by the Government, about 20,000 people now in jobs in Merseyside would not have had them. That work has been sustained by Government intervention. We believe that that process has to be extended over the period to come. The Manpower Services Commission, in particular, has produced a recent report in which it has made recommendations—and I believe that the Government will be eager to act upon them as speedily as possible—for further assistance for young people, who form a major part of the problem. What is requited is Government intervention, and those on the Government Benches understand the fact.

Mr. Heffer: Is my right hon. Friend aware that if one analyses the votes on Merseyside one sees that Opposition Members have nothing to crow about and that in a General Election the results on Merseyside would be precisely as they are now? [Interruption.] Yes—with more Labour seats than Tory seats. Is my right hon. Friend further aware that if Conservative policies were carried out, with massive further cuts in public expenditure plus a failure to assist in bringing industry to Merseyside, unemployment there would be far higher than it is?

Mr. Foot: I fully accept what my hon. Friend has said. I could not have said it better myself. If those Opposition Members who to judge from these questions, have apparently shown some interest in Merseyside had taken rather more interest in previous discussions, they would have realised that representations have been made by my right hon. and hon. Friends on matters affecting employment on Merseyside over many months and that some of the improvements that we have been able to achieve have been achieved precisely because we have responded to those representations.

FOREIGN SECRETARY (SPEECH)

Mr. Pattie: asked the Prime Minister if the speech made by the Secretary of State for Foreign and Commonwealth Affairs on economic policy at Castleford Trades and Labour Clubs on 23rd April 1977 represents Government policy.

Mr. Aitken: asked the Prime Minister if the speech made by the Secretary of State for Foreign and Commonwealth Affairs on economic policy at Castleford Trades and Labour Clubs on 23rd April 1977 represents Government policy.

Mr. Michael Latham: asked the Prime Minister if the public speech by the Secretary of State for Foreign and Commonwealth Affairs on economic policy in Castleford on 23rd April 1977 represents Government policy.

Mr. Foot: I have been asked to reply.
I refer the hon. Members to the reply that my right hon. Friend gave to the hon. Member for Christchurch and Lymington (Mr. Adley) on 2nd May.

Mr. Pattie: Does the right hon. Gentleman recall that in his speech the Foreign Secretary said specifically that the Government, ahead of any negotiations with the TUC, had already decided on a ceiling of 8 per cent. or 9 per cent. for wages policy in phase 3, and that he went on to say that if this was not possible we should be in danger of losing all the ground so painfully won? As most sections of society have now experienced the pain, can the right hon. Gentleman give some examples of the ground that has been won?

Mr. Foot: The hon. Gentleman is under a misapprehension. My right hon. Friend the Foreign Secretary did not state the matter in the terms set out by the hon. Gentleman. The figure that he referred to in his speech was a single-figure pay-price equation. He referred to the desirability of securing such a figure, and, of course, that figure itself was referred to by the TUC in its economic review.

Mr. Aitken: In the light of the statement made by the Prime Minister following the economic Summit, can the right hon. Gentleman clarify whether it is the

lowering of the inflation rate or the lowering of the unemployment total that is now the Government's new and first priority? If it is the latter, will he help the House by giving a forecast of the number of people who will be unemployed by the end of the year?

Mr. Foot: The hon. Gentleman seeks to play with words. My right hon. Friend and the communiqué stated plainly that priority would be given to creating jobs and overcoming the common unemployment problem that we have in all our countries. My right hon. Friend and others emphasised also that this is inextricably tied up with the fight against inflation as well.

Mr. Latham: In relation to pay and prices policy, have not the events of the last 24 hours shown clearly that High Street competition, with or without Green Shield stamps, is worth more to the housewife than any number of stage 3s, prices Bills and price codes?

Mr. Foot: I do not think that that is what most of the housewives in the country think about the situation. Indeed, if they were satisfied with that form of competition, they would not have been misled into voting as they did on Merseyside. It is precisely because of the general inflation that they took many of the courses they did. I assure the hon. Gentleman that his solution is not one that can be applied properly and successfully across the economy as a whole.

Mr. Cohen: As the Question refers to the economic policy of the Government, will my right hon. Friend confirm that the agreement reached at the Summit Conference will in no way adversely affect the existing hope of extending legislation in respect of dumping in the clothing, steel, textile, leather and other industries in this country?

Mr. Foot: I can give my hon. Friend confirmation on that point. As my right hon. Friend the Prime Minister indicated, there was no change of policy in that respect. These matters are governed by provisions involved in international arrangements which have already been reached.

Mr. Pardoe: I recognise the right hon. Gentleman's reluctance to give a figure in respect of pay policy, but does he


accept that in phase 3 of the Conservative Government's policy an earnings increase of well over 16 per cent. was allowed? Does he accept that anything better than that would at least be an advance on Toryism?

Mr. Foot: I would not go into any figures, but I hope that I shall not cause any difficulties with the hon. Gentleman. One of the special difficulties that the Conservatives left us in dealing with these matters was their insistence on a statutory incomes policy. We do not believe that that is the right way to deal with the situation. As far as figures are concerned, I have indicated the general terms in which my right hon. Friend the Foreign Secretary referred to the matter. But all these aspects are for general discussion between the Government and representatives of the TUC, and we have not discussed matters in these terms at all.

Mr. Mates: Why has the right hon. Gentleman not answered the supplementary question put by my hon. Friend the Member for Thanet, East (Mr. Aitken)? If the Prime Minister was being serious yesterday in saying that the fight to find jobs for our people is now the primary fight, why cannot the right hon. Gentleman give even a target for the end of this year?

Mr. Foot: The hon. Gentleman knows, and everyone with experience knows, that it would be absurd to give a figure for the whole of the countries that are involved. There are 15 million unemployed in the Western world. No one could give a sensible target of what could be achieved by the end of the year in that respect. Therefore, it would not be possible to relate these general measures to particular countries, either. This matter does not bear any relevance to the rather dodgy supplementary question that the hon. Member for Thanet, East (Mr. Aitken) put. [Interruption.] The answer has been dodged because the question was not designed to get a clear answer.

Mrs. Castle: If the Government have not a target for the movement of employment over the next 12 months, quite apart from the question whether they could hit that target, will it not be extremely difficult for them to announce very shortly, as they promised, the figure for the up-rating of pensions next November, which,

under the forecasting method, has to be linked with the future movement of earnings? Would it not therefore be wiser for the Government to return to the historical method, or allow a very large margin of contingency in case earnings turn out to be a great deal higher than they intend?

Mr. Foot: I did not make any statement about the Government not having a target for earnings; I was asked whether the Government would give a target for unemployment by a specific time, or at any rate an approximate time. That did not relate to anything about earnings. The hon. Member for Chertsey and Walton (Mr. Pattie) asked me about the speech by my right hon. Friend the Foreign Secretary, and I recalled the general terms in which this matter was referred to in the TUC document. As I indicated earlier, we have not reached any discussion of the detailed figures in talks with the TUC on these matters as yet, and therefore the question put by my right hon. Friend the Member for Blackburn (Mrs. Castle) does not arise.

Mr. Patrick Jenkin: Since the Foreign Secretary is a member of the medical profession, and since leaks of the Doctors' and Dentists' Review Body Report show that it is entirely within the pay policy, why has that report not yet been published?

Mr. Foot: The right hon. Gentleman seems to have an obsession with this subject. The Government are entitled to consider the matter, and I am sure that all the right hon. Gentleman's doubts will eventually be allayed.

QUESTION OF PRIVILEGE (MR. SPEAKER'S RULING)

Mr. Speaker: Yesterday the hon. Member for Sowerby (Mr. Madden) raised as a matter of privilege certain expressions allegedly used about his fellow Members by the hon. Member for Antrim, North (Rev. Ian Paisley) during the course of a radio broadcast on Wednesday of last week.
Before I rule on whether I am able to give this complaint precedence over the Orders of the Day, I must explain both to the hon. Member for Sowerby


and to the House that I am bound by the practice of my predecessors, which has now become a firm rule of the House, acknowledged by the Select Committee on Parliamentary Privilege of 1967–68. That is, that a Speaker can afford precedence only if a complaint of privilege is raised at the earliest opportunity.
It would be a departure from that rule if I allowed a Member to wait until a broadcasting authority supplied him with a copy of a transcript of a broadcast before deciding whether or not to make a complaint. Statements broadcast by radio are in this sense no different from any other statements; they must be raised as soon as possible.
In this particular case, I find that the words complained of by the hon. Member for Sowerby were reported almost word for word in at least one national daily newspaper on the day after the broadcast and could have been raised with me last week.
I must therefore rule that I cannot give the complaint precedence over the Orders of the Day.
Having said that, I think I would be failing in my duty as Speaker if I did not condemn in the strongest possible terms the use of such language by the hon. Member for Antrim, North about his colleagues in this House, if he has been correctly reported. Expressions of this nature should not be used by any Member about other hon. Members, whether inside or outside the Chamber.
I regret that I have to say this in the absence of the hon. Member for Antrim, North. I would much rather have said it in his presence, if that had been possible.

Several Hon. Members: Several Hon. Members rose—

Mr. Speaker: I shall take points of order, but I hope they are not challenging my ruling.

Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. Following that ruling, it would be helpful to the House if we could have guidance on one point. As I understand the practice, in the past Speakers have preferred, after an hon. Member has made a verbal complaint of breach of privilege of this nature, to have

the original source of record handed to the Speaker on which to investigate. If it is to be the case that in future Mr. Speaker prefers a second-hand reference, and not a primary authority of the words recorded, it would be helpful if this were explicitly stated from the Chair, because I think many hon. Members were genuinely under the impression that the Chair preferred to have an authentic record of the words said, spoken or written on the first occasion when they were available rather than a second-hand record of words which had been spoken elsewhere and which might not be a correct record.
I respectfully submit that if the Chair adopts the preference of a second-hand report this might involve the Chair in having to rule on words which have not in fact been spoken and which could be inaccurate in the second-hand report. Not with reference to this particular case, Mr. Speaker, but on the general principle, I would be most grateful if you would give consideration to this point of general principle and share your thoughts with the House when you have considered it.

The Lord President of the Council and Leader of the House of Commons (Mr. Michael Foot): Further to that point of order, Mr. Speaker. May I support what the hon. Member for Tiverton (Mr. Maxwell-Hyslop) has said in the sense that I believe that it would be desirable to look at this aspect of the question? Possibly, since the Committee of Privileges is looking at another general aspect of the matter, it might look at this aspect as well and include some reference to it in the report which the Committee is preparing for the House.

Mr. Madden: Further to that point of order, Mr. Speaker. I shall in no way challenge your statement, because I think it reflects the difficulties in which all of us are placed with regard to matters of alleged breach of privilege which are broadcast as opposed to those which are published in newspapers. I would ask whether you would allow consideration to be given to a modification of the rules under which we work at present, because I believe we are placed in considerable difficulty.
I understand the need to bring matters of privilege to your notice at the earliest opportunity. Equally, I think we must


always have an accurate record of what is said, and I think it must also be borne in mind that matters of alleged breach of privilege which are broadcast are not necessarily published correctly in newspapers and in some cases are not reproduced at all in newspapers. Therefore, if we are to have two classes of privilege, as it were, it would seem that matters which are broadcast have a very good chance of escaping our notice while those which are published in newspapers can be brought before you at the earliest opportunity.
Therefore, in view of the difficulties which many of us have in promptly obtaining accurate transcripts from the broadcasting authorities, I would ask whether you could give consideration to this matter which, I believe, is one which will concern us increasingly in future.

Mr. Speaker: I am grateful to the hon. Members for Tiverton (Mr. Maxwell-Hyslop) and Sowerby (Mr. Madden) and to the Lord President for what they have said. I have the feeling myself, as I approach this, that it is wrong for the House to be defeated on a technicality from pursuing a question which it might wish to do. But, on the other hand, I am the guardian of the rules of the House, and I certainly undertake to look into the matters raised by the hon. Members and the suggestion made by the Lord President.

STATUTORY INSTRUMENTS; &c;

Ordered,
That the Safety Representatives and Safety Committees Regulations 1977 (S.I. 1977, No. 500) be referred to a Standing Committee on Statutory Instruments, &amp;.—[Mr. Foot.]

RENT ACT 1974 (AMENDMENT)

3.38 p.m.

Mr. Tim Renton: I beg to move,
That leave be given to bring in a Bill to amend the Rent Act 1974.
Many of us will deeply regret that the Labour Party's Home Policy Committee has decided to continue its vendetta against private landlords. What a stupid and short-sighted decision! Let me say straight away that the purpose of my Bill is to encourage the private landlord to provide accommodation for letting and thus to ease the problem of the young, the single, the homeless and the newly married, who traditionally use private rented accommodation but who are now finding it harder and harder to obtain.
It has been estimated that in 1975 there was a loss of at least 90,000 dwellings from the private rented sector. During the same year over 51,000 applications by homeless families for accommodation were recorded by councils in England. This compares with 28,000 in 1972, namely, approximately a doubling in three years. There must be some correlation between the tragic and rapid rise in homelessness and the continuing and sharp decline in the private rented sector.
Never, I believe, has there been such a perverse act as the Rent Act 1974. It reminds me of the Chinese saying describing the behaviour of fools:
Lifting a rock only to drop it on one's own feet".
The Act aimed to provide greater security of tenure for the tenant, but how can there be greater security when there is no flat or house for the tenant to tenant? That is the greatest insecurity of them all. Equally, the Act purported to give the resident landlord a greater possibility to let accommodation in his own house while at the same time granting security of tenure to the tenant. But the Act is so convoluted and difficult to understand, and there are so many exemptions and exclusions within it, that the landlord does not know where he stands. Where his own home is involved he prefers to leave accommodation empty to letting part of the house to a tenant whom the landlord subsequently finds he cannot remove and


whose presence considerably diminishes the capital value of the house.
Let me give one example of the complexity and convolution in the Act. Suppose that you, Mr. Deputy Speaker, were to be invited by Mr. Speaker to share a few rooms in the Speaker's House—because Mr. Speaker might feel somewhat lonely in that large building—and you were to agree to go for a trial period until the end of the Session. Suppose also that after that time you found that you enjoyed talking politics together at breakfast and that Mr. Speaker suggested renewing the agreement until the end of the next Session. The fact is that he could not get rid of you at the end of that time. You would be there as a protected tenant by virtue of having had two fixed-term tenancies. You would have been given the status of irremovability. I would congratulate you upon that, Mr. Deputy Speaker, but it would certainly not have been Mr. Speaker's intention that you should remain in that house when he first invited you to stay.
That is precisely the sort of booby trap which exists within the 1974 Act. That is why resident landlords are so chary of letting and why those in search of private rented accommodation find it increasingly difficult to obtain it.
I have thought it right, therefore, to bring forward this short Bill. It has the support of many of my hon. Friends and the hon. Member for Isle of Wight (Mr. Ross). It has as its main purpose to simplify the position of the resident land-lord and thus to encourage him to put more accommodation on the market.
The Bill will provide that three months after it has been enacted, all new tenancies where a resident landlord is letting accommodation in his own house will be exempted from the constraints of the Rent Acts unless both landlord and tenant agree in writing that the provisions of the Acts are to apply. This means that from that time a resident landlord will let to new tenants accommodation in his own home for fixed periods of time that may or may not be renewed, or for an unspecified period, at market rent and without creating security of tenure. The minimum period of notice to be given to such non-protected tenants will be 90 days.
I shall also seek to amend the 1974 Act so that a non-resident landlord with a genuine need to possess and occupy at a certain future date should, with the agreement of his prospective tenant, be able to grant a fixed-term tenancy without granting security of tenure. This could be implemented in two ways. First, there could be a mutually agreed fixed-term lease, operating within the existing fair rent arrangements. Here I would be following closely the pattern already suggested by my hon. Friend the Member for Kensington (Sir B. Rhys Williams).
The second possibility is that in exceptional cases a higher than fair rent could be justified, for example, where a landlord had to discharge mortgage repayments. In such a case the parties should be able to agree both a fixed term and a rent higher than that registerable generally. These agreements would be concluded in the presence of a rent officer who would thus be able to advise the parties on the implications and terms of the proposed agreement.
I am reminded of a tragic comment made in The Economist which read:
People complain that housing policy has become so complicated that they no longer understand it. But imagine their complaints if they had understood it.
My suggestions would utilise a good deal of property that is currently empty because possession cannot be guaranteed at a given future date. Even if local authorities were required to rehouse tenants after the end of the fixed term, an advantage would have been gained by delaying the time when this has to happen and the maximum possible use would have been made meanwhile of the housing stock at a time when new flats and houses are not being built in sufficient numbers.
It is imperative that we help those who need private rented accommodation. I believe that my Bill would go some way to doing that.

3.45 p.m.

Mr. Arthur Latham: I rise to oppose the Bill. The hon. Member for Mid-Sussex (Mr. Renton) began with a piece of completely false logic. He said that since there had been an increase in the number of empty properties and in difficulties of homelessness since the 1974 Act was passed, there must be a correlation. I dispute that. The process of


which he complains started long before 1974. I certainly know, on behalf of my constituents, that a great deal of unhappiness and misery has been saved as a consequence of the Government extending security of tenure to tenants of furnished accommodation.
It is true that fewer furnished dwellings are being advertised in the newspapers. Clearly, more vacancies will be advertised if the complete licence to evict, which existed for landlords of furnished accommodation hitherto, is reinstated. Similarly, since before 1974 the security granted to unfurnished tenancies did not extend to furnished tenancies, there was a motivation for landlords to transfer unfurnished accommodation into furnished by putting in a few sticks of furniture. This denied the tenants their security. When that device was prohibited it was clear that there would be less furnished accommodation arising from that source.
It is true that there is some misunderstanding among resident landlords. That, frankly, is less a consequence of the legislation and more a consequence of Tory propaganda, which has sought to use the private resident landlord as an excuse for urging greater freedom for landlords of the Freshwater and Stern variety, which are rife in my constituency and in many others.
If the hon. Member for Mid-Sussex is concerned about the number of empty properties, he would have done far better to be in the House when my hon. Friend the Member for Salford, East (Mr. Allaun) sought to introduce a Bill dealing with the requisitioning of empty properties. That would have dealt with the bulk of the problem, with the kind of landlord—not the resident landlord—who finds it

more profitable to leave one or two flats empty in a multi-storey block with a view to selling it and enhancing its value. That Bill would have helped people who are in dire need of accommodation by providing these premises at a reasonable rent.

This Bill should be opposed because it gives a completely false impression of the nature of homelessness and of the reasons for empty properties. If the House were to pass the Bill it would strike a chill fear into the tenants of furnished accommodation who were granted security in 1974.

One of the constant problems from which furnished tenancies suffered was that formerly tenants could not use the provisions of other Rent Acts to have rents reduced or to have unsatisfactory conditions remedied by the landlord, because if they had asserted their rights, eviction would have followed as sure as day follows night. Following from that situation, other safeguards which were not available to furnished tenants until 1974 have now become available to them.

I hope that the House will have the good sense to throw the Bill out and to wait for a more worthwhile measure to be introduced by the Government, making any adjustments that are necessary and, most particularly, introducing powers to allow empty properties to be requisitioned.

Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at the commencement of Public Business) :—

The House divided: Ayes 175, Noes 199.

Division No. 127]
AYES
[3.50 p.m.


Adley, Robert
Budgen, Nick
Fairgrieve, Russell


Amery, Rt Hon Julian
Burden, F. A.
Fell, Anthony


Arnold, Tom
Butler, Adam (Bosworth)
Finsberg, Geoffrey


Atkins, Rt Hon H. (Spelthorne)
Chalker, Mrs Lynda
Fletcher, Alex (Edinburgh N)


Bain, Mrs Margaret
Clarke, Kenneth (Rushcliffe)
Fookes, Miss Janet


Belth, A. J.
Clegg, Walter
Forman, Nigel


Bell, Ronald
Cope, John
Fowler, Norman (Sutton C'f'd)


Benyon, W.
Costain, A. P.
Freud, Clement


Berry, Hon Anthony
Crawlord, Douglas
Fry, Peter


Biggs-Davison, John
Crouch, David
Gardner, Edward (S Fylde)


Blaker, Peter
Davies, Rt Hon J. (Knutsford)
Gilmour, Rt Hon Sir Ian (Chesham)


Body, Richard
Dean, Paul (N Somerset)
Goodhart, Philip


Boscawen, Hon Robert
Douglas-Hamilton, Lord James
Goodhew, Victor


Bottomley, Peter
Drayson, Burnaby
Goodlad, Alastair


Bowden, A. (Brighton, Kemptown)
Durant, Tony
Gow, Ian (Eastbourne)


Boyson, Dr Rhodes (Brent)
Edwards, Nicholas (Pembroke)
Gower, Sir Raymond (Barry)


Braine, Sir Bernard
Elliott, Sir William
Gray, Hamish


Brocklebank-Fowler, C.
Ewing, Mrs Winifred (Moray)
Grimond, Rt Hon J.


Brooke, Peter
Eyre, Reglnald
Grist, Ian


Buchanan-Smith, Alick
Fairbairn, Nicholas
Gryils, Michael




Hall, Sir John
Mitchell, David (Basingstoke)
Shersby, Michael


Hamilton, Michael (Salisbury)
Moate, Roger
Sims, Roger


Hannam, John
Molyneaux, James
Sinclair, Sir George


Harrison, Col Sir Harwood (Eye)
Monro, Hector
Skeet, T.H.H.


Hicks, Robert
Montgomery, Fergus
Smith, Dudley (Warwick)


Higgins, Terence L.
More, Jasper (Ludlow)
Smith, Timothy John (Ashfield)


Holland, Philip
Morgan, Geraint
Spence, John


Hordern, Peter
Morgan-Giles, Rear-Admiral
Spicer, Michael (S Worcester)


Howe, Rt Hon Sir Geoffrey
Morrison, Charles (Devizes)
Stenbrook, Ivor


Howell, David (Guildford)
Morrison, Hon Peter (Chester)
Stanley, John


Howells, Geraint (Cardigan)
Mudd, David
Steel, Rt Hon David


Hunt, David (Wirral)
Neave, Airey
Steen, Anthony (Wavertree)


Hunt, John (Bromley)
Nelson, Anthony
Stewart, Rt Hon Donald


Irving, Charles (Cheltenham)
Neubert, Michael
Stokes, John


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Newton, Tony
Stradling Thomas, J.


Johnson Smith, G. (E Grinstead)
Nott, John
Taylor, Teddy (Cathcart)


Johnston, Russell (Inverness)
Oppenheim, Mrs Sally
Tebbit, Norman


Jopling, Michael
Page, John (Harrow West)
Thatcher, Rt Hon Margaret


Kaberry, Sir Donald
Page, Rt Hon R, Graham (Crosby)
Thompson, George


Kershaw, Anthony
Page, Richard (Workington)
Thorpe, Rt Hon Jeremy (N Devon)


Knight, Mrs Jill
Pardoe, John
Townsend, Cyril D.


Lamont, Norman
Parkinson, Cecil
Wakeham, John


Latham, Michael (Melton)
Pattie, Geoffrey
Wall, Patrick


Lawson, Nigel
Penhaligon, David
Walters, Dennis


Le Marchant, Spencer
Percival, Ian
Weatherill, Bernard


Lewis, Kenneth (Rutland)
Peyton, Rt Hon John
Wells, John


Lloyd, Ian
Powell, Rt Hon J. Enoch
Welsh, Andrew


Luce, Richard
Price, David (Eastleigh)
Whitelaw, Rt Hon William


McAdden, Sir Stephen
Pym, Rt Hon Francis
Wiggin, Jerry


Macfarlane, Neil
Renton, Rt Hon Sir D. (Hunts)
Wigley, Dafydd


MacGregor, John
Renton, Tim (Mid-Sussex)
Wilson, Gordon (Dundee E)


Mackay, Andrew James
Rhodes James, R.
Winterton, Nicholas


McNair-Wilson, M. (Newbury)
Ridley, Hon Nicholas
Wood, Rt Hon Richard


Marten, Neil
Rifkind, Malcolm
young, Sir G. (Ealing, Acton)


Mather, Carol
Roberts, Michael (Cardiff NW)
Younger, Hon George


Maudling, Rt Hon Reginald
Roberts, Wyn (Conway)



Mawby, Ray
Ross, Stephen (Isle of Wight)
TELLERS FOR THE AYES:


Mayhew, Patrick
Rost, Peter (SE Derbyshire)
Mr. Michael Marshall and


Meyer, Sir Anthony
Shaw, Giles (Pudsay)
Mr. Michael Morris.


Mills, Peter
Shepherd, Colin





NOES


Archer, Peter
Dean, Joseph (Leeds West)
Jackson, Miss Margaret (Lincoln)


Armstrong, Ernest
Dempsey, James
Jay, Rt Hon Douglas


Ashley, Jack
Doig, Peter
Jenkins, Hugh (Putney)


Ashton, Joe
Dunn, James A.
John, Brynmor


Atkins, Ronald (Preston N)
Eadie, Alex
Johnson, James (Hull West)


Atkinson, Norman
Edge, Geoff
Johnson, Walter (Derby S)


Bates, Alf
Ellis, John (Brigg &amp; Scun)
Jones, Alec (Rhondda)


Bidwell, Sydney
English, Michael
Jones, Barry (East Flint)


Bishop, E. S.
Ennals, David
Kaufman, Gerald


Blenkinsop, Arthur
Evans, Ioan (Aberdare)
Kelley, Richard


Booth, Rt Hon Albert
Ewing, Harry (Stirling)
Kerr, Russell


Boothroyd, Miss Betty
Faulds, Andrew
Kilroy-Silk, Robert


Bottomley, Rt Hon Arthur
Fitch, Alan (Wigan)
Kinnock, Neil


Bradley, Tom
Flannery, Martin
Lambie, David


Brown, Hugh D. (Provan)
Fletcher, Ted (Darlington)
Lamborn, Harry


Buchan, Norman
Foot, Rt Hon Michael
Lamond, James


Buchanan, Richard
Fraser, John (Lambeth, N'w'd)
Latham, Arthur (Paddington)


Butler, Mrs Joyce (Wood Green)
Freeson, Reginald
Lestor, Miss Joan (Eton and Slough


Callaghan, Jim (Middleton &amp; P)
Garrett, John (Norwich S)
Lewis, Ron (Carlisle)


Campbell, Ian
George, Bruce
Lipton, Marcus


Canavan, Dennis
Ginsburg, David
Loyden, Eddie


Cant, R. B.
Golding, John
Lyon, Alexander (York)


Carmichael, Neil
Gould, Bryan
Mabon, Rt Hon Dr J. Dickson


Carter-Jones, Lewis
Graham, Ted
McCartney, Hugh


Cartwright, John
Grant, George (Morpeth)
McDonald, Dr Oonagh


Castle, Rt Hon Barbara
Grant, John (Islington C)
McElhone, Frank


Clemitson, Ivor
Hamilton, James (Bothwell)
MacFarquhar, Roderick


Cocks, Rt Hon Michael
Harper, Joseph
McMillan, Tom (Glasgow C)


Cohen, Stanley
Harrison, Walter (Wakefield)
McNamara, Kevin


Coleman, Donald
Hatton, Frank
Madden, Max


Colquhoun, Ms Maureen
Healey, Rt Hon Denis
Magee, Bryan


Conlan, Bernard
Heffer, Eric S.
Mahon, Simon


Cook, Robin F. (Edin C)
Hooley, Frank
Mallalieu, J.P.W.


Corbett, Robin
Horam, John
Marshall, Jim (Leicester S)


Cowans, Harry
Hoyle, Doug (Nelson)
Maynard, Miss Joan


Cox, Thomas (Tooting)
Huckfield, Les
Mendelson, John


Crawshaw, Richard
Hughes, Rt Hon C. (Anglesey)
Mikardo, Ian


Crowther, Stan (Rothetham)
Hughes, Robert (Aberdeen N)
Millan, Rt Hon Bruce


Cryer, Bob
Hughes, Roy (Newport)
Miller, Mrs Millie (Ilford N)


Cunningham, G. (Islington S)
Hunter, Adam
Mitchell, Austin Vernon (Grimsby)


Davies, Bryan (Enfield N)
Irvine, Rt Hon Sir A. (Edge Hill)
Molloy, William


Deakins, Eric
Irving, Rt Hon S. (Dartford)
Moonman, Eric







Morris, Alfred (Wythenshawe)
Rom, Rt Hon W. (Kilmarnock)
Torney, Tom


Morris, Charles R. (Openshaw)
Rowlands, Ted
Tuck, Raphael


Morris, Rt Hon J. (Aberavon)
Sandelson, Neville
Varley, Rt Hon Eric G.


Moyle, Roland
Sedgemore, Brian
Wainwright, Edwin (Dearne V)


Mulley, Rt Hon Frederick
Selby, Harry
Walker, Terry (Kingswood)


Murray, Rt Hon Ronald King
Shaw, Arnold (Ilford South)
Ward, Michael


Newens, Stanley
Sheldon, Rt Hon Robert
Watkins, David


Noble, Mike
Short, Mrs Renee (Wolv NE)
Watkinson, John


O'Halloran, Michael
Silkin, Rt Hon John (Deptford)
Weitzman, David


Orbach, Maurice
Silkin, Rt Hon S. C. (Dulwich)
White, James (Pollok)


Orme, Rt Hon Stanley
Silverman, Julius
Whitlock, William


Padley, Walter
Skinner, Dennis
Willey, Rt Hon Frederick


Park, George
Small, William
Williams, Rt Hon Alan (Swansea W)


Pavitt, Laurie
Smith, John (N Lanarkshire)
Williams, Alan Lee (Hornch'ch)


Pendry, Tom
Spearing, Nigel
Williams, Rt Hon Shirley (Hertford)


Perry, Ernest
Spriggs, Lesile
Wilson, Alexander (Hamilton)


Radice, Giles
Stallard, A. W.
Wilson, William (Coventry SE)


Rees, Rt Hon Merlyn (Leeds S)
Stewart, Rt Hon M. (Fulham)
Wise, Mrs Audrey


Richardson, Miss Jo
Stoddart, David
Woodall, Alec


Roberts, Albert (Normanton)
Strauss, Rt Hon G. R.
Woof, Robert


Roberts, Gwilym (Cannock)
Summerskill, Hon Dr Shirley
Young, David (Bolton E)


Robinson, Geoffrey
Taylor, Mrs Ann (Bolton W)



Roderick, Caerwyn
Thomas, Jeffrey (Abertillery)
TELLERS FOR THE NOES:


Rodgers, George (Chorley)
Thomas, Mike (Newcastle E)
Mr. Ron Thomas and


Rooker, J. W.
Thorne, Stan (Preston South)
Mr. Frank Allaun.


Rose, Paul B.
Tinn, James

Question accordingly negativated

Orders of the Day — FINANCE BILL

(Clauses 4, 15, 21; new clauses relating to value added tax, sub-contractors in the construction industry, benefits from employment (motor cars), and capital gains tax).

Considered in Committee [Progress 9th May].

[Mr. BRYANT GODMAN IRVINE in the Chair]

Clause 15

CHARGE FOR INCOME TAX FOR 1977–78

4.2 p.m.

Dr. Oonagh McDonald: I beg to move Amendment No. 17, in page 17, in page 11, leave out lines 13 to 36 and add
all other rates of income tax shall be the same for 1977–78 as for 1976–77".
The amendment concerns the tax concessions given in the Budget to those who have to pay higher rates of income tax. If adopted, it would save £320 million, which the supporters of the amendment argue would be better spent in giving greater relief to the lower paid or in more greatly funding child benefit.
The arguments to which the Chancellor of the Exchequer has listened over the last few weeks have led him to give these tax concessions to the higher paid. He has been seduced yet again by the siren voices of the CBI. He has listened to the argument that suggests that the social contract has brought about a significant improvement in the relative position of the low paid at the expense of the higher paid. He has listened to the view that the relative rewards of mangement and professional groups have been severely eroded because of the effects of the incomes policies. Both arguments are false, and the Chancellor should not even have listened to them, let alone have been taken in by them.
Let us look at the effect of incomes policy during 1975–76, which is the only year for which we have full statistics available. We can compare matched groups and see, for example, that the earnings of accountants

increased by 22 per cent. in that year while the earnings of manual workers went up by only 17 per cent. It may be suggested that by picking out accountants I am putting the argument in the most favourable terms for myself, but the sorts of increases gained by accountants in that year were not untypical. In every case the percentage increase of non-manual groups was higher than the percentage increase for manual workers.
The figures show that the first year of incomes policy did nothing to give a greater benefit to low-paid manual workers at the expense of the higher-paid. We do not have the full statistics for 1976–77, but there is no reason to believe that there has been an improvement in the position of the low paid during the past year at the expense of higher paid, non-manual workers. The reason is that the best chance of such an improvement coming about was in 1975–76—the year of the flat-rate £6 per week increase.
Generally, non-manual workers have received greater percentage increases than have manual workers. In the weeks preceding the Budget there were many rumours of tax concessions, and middle management made its voice heard. Middle managers are supposed to have been especially badly treated, but if we look at the way their relative position changed, we find that in 1975 the management group received 189 per cent. of the earnings of the lowest paid group and in 1976 that figure had risen to 195 per cent. In other words, the differential between middle management and the lowest paid has increased while the pay policy has been in operation.
We cannot look only at increases in wages and salaries, because the management group benefits also from increments, artificial regrading or promotion as a way round the pay code and fringe benefits that are not reflected in the earnings figures to which I have referred. A survey of the salaries of 7,000 executives in nearly 600 companies brought this out clearly. It showed that the average increase in executives' salaries was £508 in the year up to July 1976—when the maximum increase was supposed to be £312 a year. In that period, the average company secretary in the private sector received an increase of £803, and the report also shows an


increase in the number of employees receiving fringe benefits.
In that period, certain professional groups managed to maintain or even improve their relative position in the structure of rewards. Meanwhile, the low paid suffered not just from having their wages held down but also because their overtime rates remained unchanged. They also suffered from the effects of income tax on those overtime rates and, although the low-paid workers would benefit most from a consolidation and raising of the tax thresholds beyond that which the Chancellor has offered in the Budget, nothing of that sort has been seriously offered as a way of improving their position.
It is clear that the Budget has done little to improve the lot of the lowest paid. If we take the very lowest paid, we can see what an enormous difference in wages and salaries exists in our society and that the Chancellor of the Exchequer in the Finance Bill does little or nothing to correct it.
Let us take those covered by the 43 wages councils. These set legal minimum rates of pay for about 3 million people. The Opposition weep crocodile tears about the low-paid workers and the need for an incentive to work. When I look at the wage rates for these 3 million people, I cannot understand why they bother to go to work at all. But, of course, if the Opposition spent less time weeping crocodile tears and more time asking for the Government to increase the investigation of those employers who fail to pay the minimum wages, for more charges to be brought against mean and stingy employers, and for more severe punishments to be imposed on those same employers, we might no longer regard them as crocodile tears.

Mr. Sydney Bidwell: Bring back the birch.

Dr. McDonald: Let us get back to those covered by the wages councils. After two stages of pay policy, this group's wages range from £34 at the top end to £23·35 at the bottom end of the scale. When we look at those figures, which are bad enough as they stand, we have to remember that many workers have not yet received stage 2 of the pay policy, for about one-third of the wages councils have not yet come to a decision,

although it is now May, about the stage 2 settlements. But, of course, the problems of these workers are made worse, not better, by the tax system. It has become increasingly less progressive each year and is having a severe effect on the living standards of the low paid. When we take national insurance contributions into account, we see that they suffer even more from this kind of imposition.
The Chancellor of the Exchequer claims to have helped this group. Raising the tax threshold does help, and no doubt low-paid workers and the least well-off are glad of the little concession that the Chancellor has given in this Budget. Some people have been brought out of tax altogether, and some will get some boost to their income during the course of this year. But when we look at the figures given with the Finance Bill, we find that they are not among those who benefit most, as the Treasury's own figures make clear.
The costs of tax concessions in the Finance Bill to those who earn under £4,000 a year are £796 million. To those earning £4,000 a year and more, the cost of the concessions is £1,454 million. In fact, what the Chancellor has done in this Budget is to use the tax system to widen differentials and not to decrease them. This is directly contrary to the priorities as set out by the TUC and the Government—that is, to help the low paid most—at the beginning of the social contract.
If we look at what has been done in the Budget, we find first that the increases in the personal tax allowances are not enough to restore them to their real value of a year ago. Secondly, we find that the increases in the tax allowances are more than enough to offset the effects of inflation for the higher paid.
4.15 p.m.
When it comes to cushioning people against the worst effects of inflation, the Chancellor has quite deliberately rigged the Budget so that it protects the higher paid—not, I agree, the most highly paid—much more than the lower paid. Perhaps the Chancellor has reason for doing this, for the Chancellor takes first the average male earnings as being £80 a week. I shall not argue about that figure. It is possibly a little bit up or down. But he does not notice that 60 per cent of


male wage and salary earners earn less than £80 a week.
The Chancellor is one of two people in the country at the moment who believe that skilled workers earn £120 a week. The first is a Mrs. King, who wrote to the Prime Minister about this point a couple of weeks ago and complained about it. The other is the Chancellor. If skilled workers are earning £120 a week, I should like to know where those skilled workers exist. There may be one or two who, because of overtime and so on, have reached that magnificent sum, but in talking to workers in the engineering industry I find that for a 40-hour basic week engineers' earnings are somewhere between £58 and £65.
Taking average weekly earnings for typical engineers during March 1977—this is including overtime and so on—a typical month goes like this: first week, £72, second week, £81, third week, £75, and fourth week, £90. That, of course, includes overtime, bonuses and so forth, but, in spite of all those efforts on the part of a skilled engineer, it is still nowhere near £120 a week. If we take miners, for example, and look at the wages of face workers, we find that the top rate is £70 a week, with surface workers and other underground workers earning considerably less than that.
In other words, skilled workers are nowhere near the figure of £120 a week which the Chancellor has dreamed up in order to justify the kinds of tax concessions that he gives in his Budget. It is no wonder that The Sunday Times reported that there had been laughter in the executive washrooms after the Budget. But, of course, there was no laughter in the toolrooms, as the by-election result at Stechford two days after the Budget no doubt showed, but apparently not clearly enough.
To sum up, this Budget does not do enough to help working people, neither skilled workers nor unskilled manual workers. By adopting this amendment and saving £320 million, the Government could better use that sum to benefit the low paid. This could be done either by raising the child benefit by about 50p a week, or, by abandoning the tax reduction from 35 per cent. to 33 per cent., raising the threshold of the child benefit—this would benefit those who most

need help—rather than falling once again for the line that is shot by the CBI.

Mr. Nicholas Ridley: I came to listen to the hon. Member for Thurrock (Dr. McDonald) thinking that she would talk about the higher rates of tax, but instead she talked about rates of earnings. I have no criticism to make of her because of that, especially as she succeeded in keeping within your watchful eye, Mr. Godman Irvine. On the other hand, if the hon. Lady can do that, I suppose I am not debarred from making a few remarks about earnings.
I wish I had known that the hon. Lady was going to do this, because I have on my desk a table of the increase of earnings in the public sector since the Government came to power. Unfortunately, I shall have to try to remember the figure. I think I am right in saying—it might be a few points wrong—that non-manual public servants, that is to say, the Civil Service, since the Government came to power have had on average an increase of 92 per cent. in earnings, whereas in the manual grade the figure is 78 per cent. In a sense this bears out the point that the hon. Lady was making in regard to the public sector, but if she were to look at the figures for the private sector she would find a very different story.
Another ground on which the hon. Lady may be said to be putting misleading figures before the House is that she mostly quoted figures for 1975 over 1974, when, of course, there was no pay policy—

Dr. McDonald: I said repeatedly 1975 to 1976.

Mr. Ridley: Obviously, I misheard the hon. Lady, but the point is still valid—namely, that if she examines the whole period from 1976 to 1977 she will find a greatly reducing differential.
There is another point which the hon. Lady failed to take into account. As inflation moves people through wage increases into the higher bands of tax, net incomes are much more greatly reduced. I am certain that if the hon. Lady were to present those figures in terms of net income, after allowing for inflation in the period between the time


the Government came in and the present, she would find a great compression of differentials. I commend her to make that calculation. If I had known that she was about to mention the subject of earnings, I would have worked out the figures before I rose to speak.
It is a good job that the words of hon. Members who speak in these discussions seldom if ever find their way to the constituencies. I do not think the speech made by the hon. Lady this afternoon would go down very well in Thurrock. I promise that I shall not go to Thurrock and tell them what she said. She will probably remember that recently there were strikes at The Times among printers, at British Leyland among toolroom workers, and at Heathrow among engineers—strikes all concerned with differentials. A million days were lost due to the erosion of differentials because workers wished to reassert the relative position.
I know that these matters are awkward for the Labour Party. The new doctrine of mid-term unpopularity has taken over in Labour minds from the doctrine of the manifesto. Each time Labour loses a local election, it will all be put down to the doctrines of mid-term unpopularity. It is the same sort of problem faced by the Russian leaders, and the problem in their case is that there is no end to their term of office. Indeed, what worries me is that there may be no end to the term here, if the Lord President has his way. But these matters touch democracy and the hon. Lady must pay heed to them. I was told the other day that democracy is very similar to sex—when it is good it is very, very good and when it is bad it is not all that bad. That is my advice to the hon. Member for Thurrock.
The hon. Lady should listen to the people, because a large part of the unpopularity of the Labour Party is due to the compression of differentials which, under stages 1 and 2, has caused intense irritation among the workers. Whether she can find figures to prove that that is wrong or right, I must tell her that that is the fact. Compression of differentials is not only infuriating to the skilled and hard-working employee, but it is infuriating to managements, who have the remedies in their own hands by ceasing to manage Britain and going and

managing elsewhere. That is the effect which the hon. Lady's policies are having on this country.

Mr. Ron Thomas: I agree with the hon. Gentleman, but let us come to the point of the amendment. We are talking of people who receive £7,000 a year-plus. We are are not talking about the toolmakers of British Leyland and others who rightly protest against the incomes policy, which has the support of the Opposition.

Mr. Ridley: I can talk about anybody I like. I am not going to be told about whom I may talk. I am talking about skilled workers. I make it clear to the hon. Lady that her policies for total blanket egalitarianism are not popular in this country and that the Labour Party will commit political suicide if it persists with them. Whether the matter is rectified by removing the limits of pay rises for the higher earners or by a major realignment of the higher tax bands is not so important as that the Labour Party should realise that the British are not egalitarian-minded. I repeat that the policies pursued by the hon. Lady are leading to electoral suicide.
We are told by the Prime Minister about the golden decade that is to come in the 1980s. It would be better to describe it as stage 5 to stage 15. When the great economic miracle arrives, we are told that there will be enormous resources available from the great profits of British industry and the technological white heat, and all that rubbish, which will flow in, including the profits from North Sea oil. The impression is that the Chancellor of the Exchequer will be able to make major tax cuts in the golden decade—a decade which never actually arrives. But how is the hon. Lady intending to employ that revenue which the Chancellor intends to give away? Will she reduce the higher rate taxes, or will she spend it all on child benefit, more hospitals and more roads?
It would be helpful if, in the hypothesis of economic planning, the Labour Party were to say whether it believed that the State knew better than anybody else how to spend everybody's money, and whether it will continue to compress differentials or take money away from the higher earners—managers or skilled workers—or will let that money go back to the people to fructify in their pockets.

Sir John Hall: Does my hon. Friend not agree that it is only by cutting the taxes of those who create the earnings that we shall have any chance of reaching the golden age about which my hon. Friend speaks?

Mr. Ridley: My hon. Friend makes the point on which I am about to conclude. The hon. Member for Thurrock has fallen for the fallacy of the static cake. She believes that there is a thing called the national cake, that it is always the same size, and that all one has to do is to allocate the slices to everybody and to attempt to make each slice nearly the same. But the cake is not static, and there are two things that can happen to it. The cake can either grow as the years go by or, under a Labour Government, it can actually become smaller.
The policy pursued by the Labour Government has resulted in a cake which daily gets smaller and, as the slices become more equal and smaller, everybody's slice becomes smaller. That is the reason for the unpopularity of the Labour Party. If we allow the cake to grow, not only will there be a growing slice for everybody but there will be more and more larger slices for some than for others. Judging by the hon. Lady's remarks, that simple little thought has never crossed her mind.
The way to make the cake grow larger is to employ the best managers, the best investors and the best entrepreneurs—the people who can move industry into the modern era and make investments that succeed rather than fail. That is what will result in increased prosperity.
My final message to the hon. Lady, who spoke most charmingly and delighted the House with her elegant contribution, is that until she and her party realise these things, the people of this country will be condemned to suffer a dwindling standard of living. One could term it equality of misery for all, and that is what is happening under Labour rule. I am sorry that the hon. Lady had to leave the Chamber and was unable to hear my peroration.

4.30 p.m.

Mr. Ron Thomas: It was interesting to hear the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) express

such anxiety about the possibility of the Government committing suicide. It is similar to the advice recently given by the right hon. and learned Member for Surrey, East (Sir G. Howe) on public expenditure. Unfortunately, the Government accepted that kind of advice, although the right hon. and learned Member said that it took the Government three instalments to do what he had advised them to do in one.
I believe that this Budget—and I speak as a member of the Labour Party—does not do anything like enough to help working people. They have seen their standards of living cut considerably under the social contracts in the hope of winning a quid pro quo in measures to deal with unemployment, increases in social benefits, improvements in health, education provision and all the rest of it. While they have seen cuts in their earnings they have also seen cuts in the social wage and unemployment rising to an intolerable level. The Government have followed far too much the kind of orthodox Tory policies demanded by the Opposition. We shall begin to deal with the capitalist crisis in our country only by means of a totally different economic strategy.

Sir Raymond Gower: Has it not occurred to the hon. Gentleman that companies in successful capitalist countries such as West Germany, Holland and the United States make bigger profits and pay bigger wages, that individuals and companies are taxed less, and that Holland and West Germany, for example, can afford bigger social benefits? Does he realise that by doing the things he advocates we are lessening the ability to pay such social benefits?

Mr. Thomas: The hon. Gentleman should remember that West Germany has about 1 million unemployed after sending back more than 1 million immigrant workers to Turkey, Yugoslavia and elsewhere. In many debates here it has been shown, as it will no doubt be shown again, that rates of taxation in Britain compare quite favourably with those in all the other countries which the Opposition claim have such considerable virtues.
My hon. Friend the Member for Thurrock (Dr. McDonald) was right to say that this part of the Budget gives a considerable tax handout to the high


income receivers, those who, with allowances—on high mortgages and the rest—are probably earning £7,000 to £7,500 a year and more. The Budget Statement often talks about "income", but we are talking here about taxable income after all kinds of allowances. If we agree on nothing else we should all agree that those with the highest level of earnings have all the advice possible from accountants and others to ensure that they receive the highest possible allowances.
The Sunday Times, looking at this part of the Budget, said on 3rd April:
The fattest favours go to the married man, with no children, on £22,225 a year, the sort of money a director of a biggish industrial company … earns. He makes a clear £916 a year out of the Budget, a massive 9·4 per cent. increase in his take-home pay, something he could never have made out of any conceivable jump in pay under the old tax rules. And only 1·2 per cent. of this is conditional.
All this is conditional on the move from 35 per cent. to 33 per cent. These high income receivers will have three bites at the cherry. They will receive their part of the increase in the tax thresholds; they will benefit from the reduction in the standard rate from 35p to 33p, if it happens; and they will gain something from the change in the bands above £6,000.
It was suggested that my hon. Friend the Member for Thurrock was talking too much about earnings, but earnings are related to this matter. The only justification given by the Government Front Bench is that a certain number of our supporters—we have been given no estimate, and I am not concerned about the Opposition's supporters—fall within these taxable income bands. I question this very much. As even my right hon. Friend the Chancellor said in his Budget Statement, it is one thing to talk of average earnings. I am sure that my hon. Friend the Minister of State, with his statistical knowledge, will agree with me—even if no one else will—that to talk of average earnings is often nonsense. Let us take, for example, the level of average incomes last October, which we can raise to allow for any increases under stage 2 of the incomes policy. Average earnings for male workers then ranged from £53 to £76, but the so-called average earnings are very misleading.
The latest detailed breakdown, as far as I know, is in the New Earnings Survey

for 1976 produced by the Department of Employment. I take manual workers first. With overtime, payments by results, bonuses and so on taken into account, the median level of weekly earnings for male manual workers was £62. This figure, which can be updated to allow for the phase 2 award, with an increase of 4 per cent. or 4½ per cent. means that 50 per cent. were earning less than £62. The third quartile were earning £75 a week, which means that 75 per cent. were earning less than £75. The highest decile were earning £90 a week, so 90 per cent. were earning less than that. We see that only 5 per cent. were earning more than £100 per week.
We are led to believe that some people were earning at least £120 a week, and political capital is made out of that, but, according to the statistics, even for non-manual workers the median was £73·9, which meant that 50 per cent. were receiving less. The upper quartile were earning £96·4, so 75 per cent. were receiving less than £96. The top 10 per cent. were averaging £123·7. There are only a tiny few in that category, a fraction of 5 per cent. of manual workers and a fraction of 10 per cent. of non-manual workers, depending on their allowances.
The other argument is that the high level of taxation in Britain produces a disincentive effect. We can only presume from that that there are executives and innovating entrepreneurs in Britain who are calculating every day that they will give not 100 per cent. effort but only 90 per cent., who do not give a day for Britain but say each morning "Let me work it out. In Germany I would pay only so much tax, so I shall work only 75 per cent. as hard as I might have done. I shall write only three-quarters of a memo instead of the whole of it. I shall attend only half the meeting instead of the whole meeting". That idea is nonsense. Are some of these people selling Britain down the river by refusing to use their capabilities to the full, by holding back 10 per cent., 20 per cent., or 30 per cent., because of the monetary aspect?
I think that my hon. Friend will agree that there has been no detailed analysis in recent years of the so-called disincentive effect and levels of taxation. I do not know of any study since the Radcliffe Report some 20 years ago. Therefore,


I think that I have a right to quote what that distinguished panel of economists said on the disincentive question. They said in paragraph 149:
But if we are asked to infer from this that the heavy rates have any special disincentive effect upon the receivers of the higher levels of income, so as to justify a shifting of the existing weight of taxation from these ranges to lower levels of income, we are bound to reply that we see no evidence that the higher income earners are specially affected by disincentive.
I agree that that was said some years ago, but I repeat that there has been no detailed study since. All that we have had is innuendo and blatant comment from the Conservative Party.

Sir John Hall: Does the hon. Gentleman agree that the disincentive to skilled workers, for example, of the combination of restrictions on pay increases and high taxation is shown by the fact that they are striking with increasing frequency? Does he also agree that the disincentive to higher-paid executives is measured not by their day-to-day reaction to their task but by the increasing number leaving this country to find jobs abroad? If the hon. Gentleman wishes to look at a survey, he should look at the one recently carried out by the chemical industry, which found example after example of evidence of increasing numbers of senior men and, even worse, skilled chemists leaving this country because they were no longer able to keep their families in the style in which they thought they were entitled to keep them, under the tax system operating here.

Mr. Thomas: On the latter point, skilled and professional workers have been leaving this country since we opened up the New World 200 or 300 years ago. I do not believe that the figures were any different under the Tory Government, who bent over backwards to give massive tax hand-outs to the wealthier members of our community.
I have seen nothing in the strikes about differentials regarding taxation. The strikes have been concerned with what the workers felt were rigidities in the Government's incomes policy. Some Labour Members are opposed to that policy and have tabled a number of amendments to try to push some flexibility into it.
In my judgment the Budget does not go anywhere near far enough to help those who vote for the Labour Party at local and General Elections. That is all I am concerned about. I am not concerned about any others.
I suggest that the money which is proposed to be given to these high income earners could be better used to push up the tax threshold or to deal with some of the situations which have been created by the cut-back in public expenditure. I think that we should reconsider having a smaller band rather than a marginal rate of 35 per cent. I know that this matter was discussed last night. The Government could do something about the marginal rate of 35 per cent.
All in all, what is proposed for working-class people is insufficient. I appeal to the Minister to delete this subsection and to use the money for better purposes.

Mr. J. W. Rooker: This debate is about a small section of the working population. I shall not repeat what was said by my hon. Friend the Member for Bristol, North-West (Mr. Thomas). We are talking about the higher tax rate bands. We are not talking about skilled craftsmen, because they are not paying 40 per cent. tax on any part of their income. They may bellyache justifiably about the general rate of 35 per cent. tax, but they are not paying the higher rates of tax. This debate is about page 11, lines 13 to 36 of the Bill, and nothing else.
The Chancellor in his Budget Statement said that 80 per cent. of the working population were earning between £50 and £110 a week. The Treasury's figures, backed by the Department of Employment, show that 15 per cent. of the working population earn less than £50 a week. Therefore, that leaves 5 per cent. earning more than £110 a week gross. We are concerned not with gross earnings but with taxable earnings. We are talking about those earning £7,000-plus a year.
Precisely whom are we talking about today? Who are the people earning £7,000-plus a year—£140 a week—to whom the Government wish to give a massive tax handout? They are not the skilled craftsmen in my constituency. They are certainly not any of the British


Leyland toolmakers who were on strike a couple of months ago. Not one of them is concerned with this debate. It is false to bring in such people, because it makes it look as though we are seeking to cut back on the net take-home pay of millions of ordinary skilled workers. That is far from the truth.
4.45 p.m.
My hon. Friend the Member for Bristol, North-West referred to the New Earnings Survey 1976 for the general level of earnings. Part D—"Analysis by occupation"—tells us something about the occupations in which gross earnings of more than £140 a week are possible. When I look at Table 86,
Average gross weekly earnings, hourly earnings and weekly hours Full-time men, aged 21 and over",
I could not find anyone earning £140 a week. That is because the table refers to averages. Not one occupation, manual or non-manual, achieves average earnings of £140 a week. The highest is accountants at £86 a week. That is the average.
Table 96 gives the top 10 per cent. for the various occupations. Therefore, I cast my eye down the top 10 per cent. to pick up occupations in which gross earnings are more than £140 a week, because the Government seem to believe that such people are in dire need of assistance.
Top of the list are top managers in trading organisations, who earn over £207 a week, so they are not too badly off anyway. Next come judges, barristers and solicitors, who are largely represented in the House of Commons. In fact, they are so well represented that when we have a Bill which involves the legal profession the Standing Committee cannot meet in the mornings because such Members are at the courts. That is why the Criminal Law Bill Committee can start only at 4.30 p.m. today. The top 10 per cent. of judges, barristers and solicitors are on £193 a week. That is over £140 a week. The Government think that such people are in dire need of assistance. The next in line are company secretaries, who are in receipt of £157 a week.
Going down the list, the top 10 per cent. of finance, insurance and tax specialists—they know a thing or two about Finance Bills—are earning £190 a week. They are well within the Government's

guideline of £140 a week. Personnel and industrial relations officers and managers are next. The top 10 per cent. are in receipt of £156 a week. Journalists just come in. The top 10 per cent. of our friends in the Gallery are on £144 a week. I suspect that there are not too many of them in the Gallery, although most of them earn more than full-time Members of Parliament.
Architects and town planners, who make a great contribution to society, earn £149 a week. They are well within the Government's guideline for urgent assistance. These are the people on whose behalf the Treasury must make out a case for assistance.
I do not want to be accused of putting only one side. Looking down the manual workers' list in Table 96 I could not find anyone earning over £140 a week. The top 10 per cent. of toolmakers earn £91 a week. I appreciate that these are April 1976 figures and that perhaps they should be adjusted by between 8 and 9 per cent. Even so, the top 10 per cent. of skilled toolmakers would be nowhere near paying the higher rate of tax.

Mr. Ian Mikardo: My hon. Friend is making an overwhelming case which demands an answer from the Government. The one group for which the highest decile is not included in those tables comprises those in receipt of unearned income. They are the people who will benefit most from this provision.

Mr. Rooker: My hon. Friend is perfectly correct. I shall conclude my remarks with an example of a group which is not within the figures that I have quoted from the New Earnings Survey. Not one of the manual workers in that section pays the higher rate tax. I do not mind my speech being printed in the local Press. I do not get enough publicity. None of my constituents is affected by this higher rate of tax. There may be one or two judges and barristers lurking in the undergrowth who may vote Labour. They are right to do that, because my Government have done more for them than any Tory Government.
It has been said that Britain has a high rate of taxation. A set of statistics appears in the April edition of Economic Trends for the distribution of tax units by income for the year 1974–75. I assume


that the figures are the latest available. Total income before tax on all earnings in this country—28 million tax units—was £64,000 million. The amount of tax paid on that income was only £11,000 million. That is not an astronomical sum of tax to pay for the goods and services that we require in the public sector. Those figures give the lie to the theory that Britain is a high tax rate country. It is not true. Britain is not overtaxed.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) talked of take-home pay. He made an excellent point an that important matter. I can give a good example. Since 1967 companies have been forced to publish the broad bands of directors' salaries. At first, companies lumped them together in the form of gross salaries. When people like myself "misused" those figures by telling their constituents about them, some companies began to publish a column for take-home pay alongside gross income. I have told the House before about the Delta Metal Company and how Viscount Caldecote received a pay increase during the pay freeze.
In its 1975 accounts, the Delta Metal Company said that two directors—I do not know which two—received take-home pay of between £12,500 and £15,000 a year. The 1976 report shows that one of those directors remains in that band. The other director has not merely moved up into the next band—that is not good enough—but he has moved to the £17,500 to £20,000 bracket. Assuming that he was on the highest level of this band in 1975 and earning £15,000 a year and that he is now on the lowest level of his present band, earning £17,500, he must have had an increase in take-home pay last year of not less than £50 a week. The company's annual report shows that clearly. The company boasts about giving figures for take-home pay. It is not breaking the law, but the hon. Member for Cirencester and Tewkesbury said that take-home pay was important.

Mr. John MacGregor: The hon. Member said that the tax take of income was £11 billion. The latest figures show that it is forecast to be over £18 billion. Is that not what everyone is complaining about at a time when incomes are low and inflation high?

Mr. Rooker: What the hon. Member says is true, but income before tax has gone up. The percentage of income tax paid out of total income is small.
Income tax represents a large part of total Government revenue. We are always being told by the CBI that company profits and corporation tax pay for our hospitals and schools. That is a lie. Recent figures from the Treasury show that corporation tax accounts for about 9 per cent. of Government revenue. Most revenue comes from income tax—from the pockets of all workers, whether they are high or low paid. Corporation tax no longer funds the social services in this country. They are paid for by income tax, straight from the pay packet.
I do not like that system. I should like it changed, but I should like the Government to take more from those earning more than £140 a week. There are only a few such people. Only about 800,000 people, or about 3½ per cent. of the working population are affected. They can afford to pay that tax.
The Finance Bill seeks to introduce concessions for certain people working abroad. The New Earnings Survey does not include such people. There is no column for members of the European Commission, for instance. Mr. Roy Jenkins, the President of the Commission, earns £5,000 a month, tax-free. He also gets expenses. There is no reason why Mr. Roy Jenkins should not say to the Inland Revenue "I am a Socialist worker. I know how to screw the workers and close the tax loopholes in the Cayman Islands. Please tax me as if I were working in Britain. I can afford it because I earn £70,000 a year gross." This man knows no distinction between take-home pay and gross pay.
The Birmingham Post published an article about this. In the first edition the article was entitled Socialist Workers". The copy in the Library is entitled "Wages of Socialism" It is written by the former editor of the Sunday Mercury, who has a column in the Birmingham Post. He says that people should not get on this public sector gravy train in a manner which abuses Britain's entry to the Common Market.
I know that I shall be called to order if I continue along those lines, but it is a good example of an occupation that


is not included in the list of those earning more than £140 a week. I shall have no compunction about voting for the amendment.

5.0 p.m.

Mrs. Audrey Wise: Opposition Members are strangely silent in this debate. That certainly improves the level of debate. However, that is not the reason for their silence. They are quiet because they hesitate openly to defend these tax concessions to the best-off. Even Opposition Members are not too sure of their ground and of how they would be received by ordinary people. Even when they have risen to their feet, they have managed to talk in ways which are completely irrelevant to the terms of the amendment.
As has been shown in the excellent speech of my hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), the amendment is not about skilled workers, neither their wages nor their taxes. Skilled workers will not lose a penny if the amendment is carried. In fact, the Government would have £325 million available which they could dispose of as they chose to skilled workers, semi-skilled workers or unskilled workers, all of whom have a better claim to it than those earning £140 a week and more.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) has now left the Chamber. He eulogised democracy. I was interested in that because he is the same hon. Member who, as a member of the Committee discussing the Industry Bill some two years ago, pointed out that he would rather be ruled from and by Brussels than by the elected Government of this country. I think that his attachment to democracy is, therefore, a little fickle.
However, it may have been improved by the fact—I regret to say this—that members of my own Front Bench are more and more seeking to carry out policies that smack of Tory policies. If, as the hon. Member for Cirencester and Tewkesbury suggested, they are committing suicide, that is the reason. "Midterm unpopularity" has nothing to do with the particular date on the calendar, but it has everything to do with the fact that too many policies are designed to help the better off and not those most in need.
The policy and the clause in the Bill about which we are complaining actually manages to give the highest benefit to those with a taxable income of £20,000 or more. The highest benefit goes to those people, in both percentage terms and absolute money terms. That is really outrageous. It would be outrageous coming from any Government, and it is both outrageous and sad coming from a Labour Government. That is not what we were elected to do. I think that my right hon. and hon. Friends on the Front Bench know that, although they will not admit it.

Mr. Nick Budgen: Do not go on too long.

Mrs. Wise: I shall go on for exactly as long as I choose. If the hon. Gentleman wishes to make a speech, I suggest that he tries to catch the eye of the Chair.
At the same time as we find amounts totalling £1,455 million being given to the higher paid, we are still in a situation in which a married couple can start paying tax, even after the Budget concessions, on an income of less than £24 a week. That is an extraordinary state of affairs. How can a Labour Government consider relieving those at the top of the wage and income scale at all when that is the situation at the bottom of the scale?
If there is an explanation, I should be genuinely interested in hearing it. It cannot be the incentive argument. My hon. Friend the Member for Perry Barr, in his analysis of occupations, has disposed of that. It cannot be maintained by a Labour Government that the main creators of wealth in Britain are those at the top end of the income scale. Surely all of us on the Government side of the House would agree that the wealth of the country comes from the hands of ordinary workers, and many of them are on really low incomes.
Therefore, surely the Government Front Bench will accept the amendment, having had a little longer to consider it. If they are short of suggestions as to how to use the £325 million, they should note that some of my hon. Friends and myself have tabled an amendment to Clause 21, which will also be discussed by the Committee of the whole House,


which would enable the Government to give reliefs to certain people with children—widows, people with guardians' allowances and so on. Would not that be a worthy direction in which to channel some of this £325 million?
How can my right hon. and hon. Friends say that that kind of help to widows, one-parent families and the low paid cannot be afforded while at the same time they are giving massive amounts of money to people receiving £20,000 a year or more?
The man receiving £20,000 or more will get, on figures obtained through a parliamentary answer, £679 a year in tax relief. That is on the unconditional part of the Budget. If the conditional parts go through, the figure will be £799. That is almost as much as the new total personal allowance for a single person. I find it difficult to believe that my hon. Friend the Minister can have read and digested the figures in his own parliamentary answer. I shall certainly be very interested to hear his reply on the points that we are raising.
My hon. Friend the Member for Perry Barr made an equally valid point when he referred to the increased burden which is now falling on individuals rather than on companies. I wonder whether, at some stage during the passage of the Bill, my hon. Friend the Minister will comment on this matter, because it is a fact that the burden of taxation has shifted very substantially from companies to individuals. Many of my hon. Friends think that that is a very bad development.
Once again, I ask my hon. Friend the Minister to accept the amendment. It is entirely in line with the basis on which we were elected to the House of Commons. That was to achieve a shift in wealth towards working people and their families. In our election manifesto we were talking not about the top 10 per cent. of judges and barristers but about those at the lowest end of the scale, who have had the worst out of the Chancellor's Budget.

Mr. Budgen: It is not for me to add to the splendid exposition by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) in making the classic case for what I call the incentive

argument. However, perhaps I may make some comments about the further arguments that can be adduced for allowing a diverse society to evolve with at least some members of that society both earning and keeping large incomes.
It is those who keep a reasonable proportion of a high income who are most of all the people who invest. It is not for me to comment, for instance, upon the splendid words that we have so often heard from the present Secretary of State for Trade, who so often reminds us that Government investment habits and intentions are more often than not mistaken, whereas if we allow the greater part of our investment to be undertaken by individuals—I am even so vulgar as to say "rich individuals"—there will be a diversity of investment decisions, which in the end is the greatest safeguard for the fullest employment of what the hon. Member for Coventry. South-West (Mrs. Wise) keeps describing as ordinary working people.
Those of us who want to see more investment, and investment in industries that will grow, and grow because they are truly profitable know that these investment decisions will be taken only by people who themselves have earned large incomes, have kept a large proportion of those incomes, and have made their individual decisions as to where they will get the best return for that money.

Mrs. Wise: Would the hon. Member like to suggest that tax relief should be conditional on investment being made, and being made in this country?

Mr. Budgen: No, I am so biased as to believe in freedom. I believe that the individual is entitled to make his own decision about his own money. I concede immediately that in a free society some people, if allowed to keep a larger proportion of their income, will fritter it away. There are some people who, if they have £5,000 in their hands, will put it all on the nose of a horse, and others who will go to Monte Carlo and waste it. But that is an essential part of a free society. There are even some people who may decide not to work at all, but once again that is an essential choice in a free society.
Those who are prepared to work hard and risk hard will be most inclined to


value the money that they are able to keep. They will make investment decisions on the basis of where they can get the best return. The place in which they can get the best return will be the place in which the workers have the most secure jobs. That is the investment argument.
There is a deeper and more philosophical argument which supports the retention of wealth and riches for those who work and risk hard. That is the independence argument and it is, perhaps, the most important of all.
Those persons in our society who keep wealth are more capable of forming an independent view of the great issues of the country than those who are dependent upon the whims of politicians. It matters not whether the politicians are from the dreaded National Front, the respectable Tory Party, or one or another of the Socialist parties. All of us are inclined to be wrong. All of us, when we have any sort of power, are likely to abuse it. Only by allowing individuals to have enough wealth and investment rights shall we see the creation of people in society who are prepared to dispute the orthodoxies of the moment.
I shall steal a quote that I heard from someone in the City—I do not mix much with these grand gentlemen; I am not respectable enough for such contacts. This gentleman said that if we had not had the barons, we should not have had the Magna Carta. Today if we do not have rich people, we shall have a nation of people who continue to believe in whatever the current orthodoxy may be.

5.15 p.m.

The Minister of State, Treasury (Mr. Denzil Davies): In moving this amendment my hon. Friend the Member for Thurrock (Dr. McDonald) developed an interesting argument about wage differentials and their effect on an incomes policy. She said that she disapproved of the £320 million which, if the amendment is not carried, will be given to people with higher incomes. But the £320 million is not an amorphous sum that is going to some group of persons. It is necessary to break it down, and my hon. Friend did not do that. This £320 million relates to different areas.
To start with, it includes £45 million which represents the increase in the threshold for the investment income surcharge.

This threshold has been increased from £1,000 to £1,500 for those under 65, and from £1,500 to £2,000 for those over 65. The investment income surcharge of 15 per cent. on top of the rate of tax will not apply until the income reaches £1,500 or £2,000, depending on whether a person is under 65 or over 65. Obviously, some of that money will go to people who do not need it. But I suggest that this is not unfair as many elderly people on fairly small incomes would, as a result of inflation, be caught by the investment income surcharge.
Most people when they retire have some sort of pension—a State pension, superannuation, or a pension from a pension fund. That is treated as earned income and is not taxed or charged under the investment income surcharge. But there are others—probably a minority—who cannot take advantage of the various pension arrangements, so they save their money. The income from these savings is not treated as earned income but is subject to the investment income surcharge. One reason for the modest increase in the threshold is that we want to help people in that category. Therefore, the £45 million will not necessarily go to those who are earning more than £20,000 a year.

Mrs. Wise: I am interested in my hon. Friend's comments. Would he care to undertake to come back to the House with an amendment to meet the point that he is making? Some of us would be prepared to meet him on those terms.

Mr. Davies: I am grateful to my hon. Friend for saying that. I will not bring an amendment forward, but, nevertheless, I am grateful for what she has said. The explanation that I have just given knocks out £45 million from the £320 million that the amendment seeks to remove from the Bill.
The next tranche is £90 million that the Exchequer loses as a result of raising the higher rate threshold from £5,000 to £6,000. But if we do not increase that threshold this year we shall bring 500,000 extra persons into the higher rate of tax for the first time. I do not know who all these people are, but they cannot be terribly rich by definition. Perhaps they are managers, skilled people, or households in which the income of the husband


and wife total more than £5,000. They are not necessarily those who are earning very high salaries. If the amendment were accepted and the threshold kept at £5,000, the extra 500,000 people—some of whom may be Labour supporters—would find themselves with an increased tax bill this year because inflation and perhaps increases in their incomes would bring them into a higher rate of tax.

Mrs. Wise: Will my hon. Friend accept that this argument would be more convincing if in his Budget the Chancellor had fully compensated for inflation at the lowest end of the scale? Bearing in mind that husbands and wives whose income is in excess of £5,000 can opt for separate taxation anyway, would this not take them out of the higher tax band?

Mr. Davies: I doubt whether at these levels the option for separate assessment would make any difference at all. It is a fact that if the amendment were carried, 500,000 extra people would find themselves with an increased tax bill as a result of our not doing anything for them in the Budget. If my hon. Friends press the amendment to a Division and it is carried, that would be one of the consequences, even though it might not be intended.

Mr. Ron Thomas: If my hon. Friend is saying that 500,000 people might or might not be brought into a higher tax band, this must mean that for the Government to give this sort of tax hand-out other members of the community will have to pay more tax, or there will have to be a lower level of public services and a lower social wage than there otherwise would have been, which is far less beneficial to those people whom we represent.

Mr. Davies: I would remind my hon. Friend that we are talking about £90 million. I suppose that one can have a few hopitals for that amount, but it is only a fraction of the income tax reduction of £2¼ billion in the Budget. One effect of this package of reduction of £320 million is to keep 500,000 people out of the higher rate tax bands. If we do not do this during this year, about 1·8 million people will be paying at the higher rate, whereas this change will bring the figure down to 1 million. The discrepancy

is caused by the 300,000 who are now in the higher rate and who will come out of it. That compares with 300,000 people who were in the higher rate band in 1974.
I am not saying that the figure of 300,000 then was right—perhaps it should have been higher—but if one compares the position then with what the amendment would produce, one sees that six times as many people-1·8 million—would be in the higher bracket. As a result of the Budget changes, the number this year will be kept to about 1 million, but that is still three times the 1974 figure. My hon. Friends have talked about a shift in wealth and perhaps an increase by three times is relevant to that.
Therefore, if one takes the £45 million that my hon. Friend the Member for Coventry, South-West (Mrs. Wise) seems prepared to give me and the £90 million which perhaps she is not, the balance is £185 million. Does my hon. Friend wish to intervene?

Mrs. Wise: I was making a gesture I do not agree that the £45 million change in our amendment is unjustifiable but was prepared to accommodate my hon. Friend—to compromise.

Mr. Davies: I am grateful. As I said, the balance is then £185 million, part of which is a consequence of raising the threshold from £5,000 to £6,000. Then, of course, the higher thresholds have to be raised as well. Thus, most of that £185 million goes to those on the higher levels of tax.
It could be argued, as my hon. Friends have argued, that that money could be better spent. However, I repeat that that is £185 million out of a total income reduction of £2¼ billion. I was interested to note that my hon. Friend the Member for Thurrock did not suggest how this money should be better used. She suggested not reducing the basic rate by 2 per cent. and doing something else with all the money saved. Perhaps with that extra money we could introduce a reduced rate band, but if that is what my hon. Friend wants, she must face the fact that if there is no reduction in the basic rate, we shall not help many people in the middle and on incomes of lower than average who are clearly supporters of my hon. Friends.
Unfortunately, these are the choices that we have to make. No one says that we have done enough in this Budget for ordinary people. I wish that we could have done more. I wish that we could have introduced a reduced rate band and increased the allowances to take full account of inflation, but that would have cost an enormous amount—certainly not the £185 million or £320 million in the amendment. It would have cost far more than the total by which the Chancellor felt able to reduce tax in the Budget. Thus, in terms of the total tax bill, we are talking of very small sums.
Most of this £320 million will not go to those at the top end of the tax bracket. As a result of increasing the threshold, the top marginal rate of 83 per cent. will apply now to incomes of £21,000, not £20,000. That is not a substantial change and it is justified because of our high marginal rates.
I accept that the effective rate is the one that we should look at, but, unfortunately, people tend to consider the marginal rates instead. The marginal rate of 83 per cent. is high by international standards and in this field we must compete internationally. We have an interest in ensuring that managers come to this country when their multinational firms come to invest.

Mr. Ron Thomas: Would my hon. Friend confirm the statement in The Sunday Times of 3rd April that someone on £22,225 a year will save £796, plus £120 if the basic rate is reduced from 35 to 33 per cent.? That is over £900 a year.

Mr. Davies: The figures may be correct and, taken in isolation, they seem rather horrific, but one must consider the amount involved in relation to the total tax bill. We want a tax system that is fair to most taxpayers, including those on average and below average incomes. That would cost far more money and £185 million would make no dent in the problem.

Mr. Peter Rees: To reassure his hon. Friend the Member for Bristol, North-West (Mr. Thomas), perhaps the Minister will tell him by how much the tax bill of the person he quoted went up as a result of the first two Finance Bills introduced by the Chancellor in 1974.

Mr. Davies: I could not answer that question and I do not think that it is entirely relevant to my hon. Friend's point.
We have had long debates about the advantage of a reduced rate band over reducing the basic rate by 2 per cent. so perhaps I may give some indication of the cost. A reduced rate band of 25 per cent. on the first £1,000 of taxable income would cost £2·2 billion, which is almost equivalent to the £2¼ billion by which my right hon. Friend reduced taxation in his Budget. A reduced rate band of 30 per cent. on the first £750 of taxable income would cost £870 million and a reduced rate band of 20 per cent. on the first £500, as suggested by my hon. Friend the Member for Thurrock in the Budget debate, would cost £1·5 billion.
When one considers that £45 million of this reduction is on investment income surcharge and £90 million is to keep 500,000 people out of the higher rates, I think that my hon. Friends will agree that the remaining £185 million would not make much contribution to solving the problem. In terms of the whole Budget package, £320 million is not a large sum. We wish that we could have reduced the basic rate by more and increased the allowances by more, but that would cost an enormous sum and at the moment it is not possible. Therefore, if my hon. Friends wish to press the amendment, I ask the Committee to reject it.

5.30 p.m.

Mr. David Howell: It would be wrong to let this occasion pass without saying how much we welcome the debate. Naturally, we do not welcome the amendment. We welcome the debate as it provides a good insight into the way in which the minds of hon. Members in the heart of the Labour Party are working. When we look at amendments of this sort on the Order Paper we are led to ask where those who have tabled them have been all this time. They are talking about a world that is passing away, or one that has passed. In a sense they are the parliamentary epigone, the pensioners of the past. They are museum pieces.
The arguments that have been put forward this afternoon, which the Minister has rightly put down, do not relate to the problems that the country or the ordinary people face. We all recognise the plight


of the lower paid. They are grotesquely over-taxed. They are more highly taxed in income terms than they would be in any other country in the free world. However, it seems that the hon. Member for Thurrock (Dr. McDonald) is suggesting that the way to help the lower paid is to victimise middle income groups by increasing their taxation. That is what lies behind the amendment. To imagine that by victimising that group we shall help the lower paid is a proposition so bizarre that it is almost past understanding.

Mr. Martin Flannery: The hon. Gentleman is making a valiant attempt to defend the Labour Government while some of my hon. Friends are attacking them. The hon. Gentleman uses the word "victimising" to symbolise trying to take money from the very rich to give to ordinary people. He describes those who support that approach as epigones and people from museums. Is the focal point of the hon. Gentleman's argument that we should give more to those who have and take from those who have not?

Mr. Howell: The hon. Member for Thurrock spoke in a way that did not really become her of the need for punishment of those on higher incomes. I am arguing that if we want to help the lower paid the way not to do it is to victimise or punish those who are higher paid, which happens to be about 2 million in this country.

Mrs. Wise: My hon. Friend the Member for Thurrock (Dr. McDonald) was not talking about punishing the higher paid or anyone else in respect of receiving, wages. My hon. Friend was advocating that we should punish employers who pay below the statutory legal minimum as set down by wages councils. She was speaking against the prosecution policy, which is, in effect, that employers should not be prosecuted for these flagrant breaches of the law. That was my hon. Friend's reference to punishment.

Mr. Howell: I take note of what the hon. Lady says. I shall check that in Hansard. If "punishment" is the word we are using, it is the punishment of the tax system that is hitting the lower paid. It is taking intolerable chunks out of low incomes and middling low incomes, which

is something that I wish Labour Members below the Gangway would use more energy arguing about. If they adopted that approach, they would obtain a better deal for the workers.
In the past hour or so of debate we have witnessed a predictable attack. It has been so predictable that it has represented almost an authentic part of the old Britain that many people hoped had passed. It has been an entirely predictable attack on a gigantic cadre of trained, honourable, exceptionally hardworking and devoted people. As we know, there are about 2 million of them.
The Minister has said that last year there were about 1·8 million people in the higher paid bracket. However, the attack has spread over a wider number than that. There are about 2 million people in the £100 to £200 a week bracket. The attack on these people is an attack on management.
Some hon. Members on the Labour Benches below the Gangway may welcome the fact that we are approaching a management catastrophe. Every piece of evidence in every newspaper and daily and monthly publication brings it home that we are facing such a catastrophe. It is evident that the management cadre and the skilled worker cadre are totally demoralised. They are thinking, if they can, of voting with their feet. They are worrying with an intensity that cannot be right for output and production about their living standards and how to meet the bills. At the same time the hon. Member for Thurrock and others have argued that in some way they are being helped by the Budget.
Labour Members below the Gangway say that the management and skilled worker cadres have done better than manual workers. That defies the latest survey in The Times, namely, the national management salary survey showing that managerial pay rose by 1·8 per cent. last year compared with an average rise of 11·8 per cent. for other workers. The £6 or the £4·50 was not the average pay increase or the average earnings increase. In fact, 11·8 per cent. was the average whereas the average for management was 1·8 per cent. That is a colossal fall.
The figures show that for many managers and those in the middle and


higher paid groups there has been a fall of over one-third in their net purchasing power and take-home pay. These are the people who have come under attack and faced the indignation of Labour Members below the Gangway. Those hon. Members have claimed that there has been more help in the Budget for those people. If they analysed the facts, they would find that there has been very little net help.
According to some calculations, management is supposed to have gained in money terms although not in real terms. That is as a result of lower taxation on higher incomes. However, against that we must set increased national insurance contributions. There was a large increase for those earning £100 a week, for example. They have had to pay higher rates, increased fuel bills, increased petrol prices, increased vehicle excise duty, more expensive bank loans, more expensive car use and the fact that interest-free loans will be taxed next year. Commuter fares have also been increased.
Against that background we believe that there should be an improvement. It is said that the Budget does not harm these people and that it seeks to restore incentives, but the idea that there has been an improvement is absurd.
If Labour Members think that they can treat the management cadre in this country in such a way, they have failed to learn not only from experience in this country but in the Soviet Union and practically every other country. No other country would dream of treating its skilled workers and managers as we propose, let alone in the manner proposed by some Labour Members.

Mr. George Cunningham: What increase in national insurance contributions has there been for anyone with an income of over £145 a week?

Mr. Howell: From 6th April 1977 the £100 a week man will pay another £2·19

while the £150 a week man will pay another £3·54. That is the effect of the adjustment of national insurance contributions from 6th April.

I was about to say that the debate has highlighted the catastrophic damage that has been done to management, but perhaps that is an exaggeration. The truth is that the debate has done catastrophic damage to the prospects of the Labour Party. That is why I began by welcoming the debate. I am glad that certain things have been said by Labour Members below the Gangway.

The reality is that workers do not spend their time in nail-biting envy of management and management rewards. They are not envious in that way of the differentials of those with greater responsibilities and higher pay. That is not the way in which they think. That is the way of thinking of the small museum group on the Labour Benches.

Most working people know that good management needs good pay. I suspect that most working people would argue that far greater rewards are required for responsibilities and skills than anything remotely offered in the Budget. That is why we shall be moving amendments on those lines. That is why my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) will be spelling out the real case in later speeches in Committee if he catches your eye, Mr. Godman Irvine.

That is why we welcome the half hearted defence of the Budget on the part of the Minister of State. That is why we believe that it does not begin to recognise the real needs of working people, the lower paid, management and productive capacity.

Question put, That the amendment be made:—

The Committee divided: Ayes 53, Noes, 205.

Division No. 128]
AYES
[5.39 p.m.


Allaun, Frank
Colquhoun, Ms Maureen
Heffer, Eric S.


Atkins, Ronald (Preston N)
Cook, Robin F. (Edin C)
Koyle, Doug (Nelson)


Atkinson, Norman
Cowans, Harry
Hughes, Robert (Aberdeen N)


Bennett, Andrew (Stockport N)
Edge, Geoff
Hughes, Roy (Newport)


Bidwell, Sydney
Fletcher, Ted (Darlington)
Jeger, Mrs Lena


Buchan, Norman
Fowler, Gerald (The Wrekin)
Jenkins, Hugh (Putney)


Canavan, Dennis
Garrett, John (Norwich S)
Kelley, Richard


Carmichael, Neil
Gould, Bryan
Kilroy-Silk, Robert


Cohen, Stanley
Hayman, Mrs Helene
Kinnock, Neil




Lamond, James
Miller, Dr M. S. (E Kilbride)
Skinner, Dennis


Latham, Arthur (Paddington)
Miller, Mrs Millie (Ilford N)
Spearing, Nigel


Lee, John
Newens, Stanley
Thomas, Ron (Bristol NW)


Loyden, Eddie
Ovenden, John
Thorne, Stan (Preston South)


Lyon, Alexander (York)
Richardson, Miss Jo
Wilson, William (Coventry SE)


McDonald, Dr Oonagh
Roberts, Gwilym (Cannock)
Wise, Mrs Audrey


Madden, Max
Rooker, J. W.



Marshall, Jim (Leicester S)
Rose, Paul B.
TELLERS FOR THE AYES:


Maynard, Miss Joan
Selby, Harry
Mr. Russell Kerr and


Mikardo, Ian
Silverman, Julius
Mr. Martin Flannery




NOES


Abse, Leo
Harrison, Walter (Wakefield)
Perry, Ernest


Archer, Peter
Hatton, Frank
Price, William (Rugby)


Armstrong, Ernest
Healey, Rt Hon Denis
Radice, Giles


Ashton, Joe
Henderson, Douglas
Rees, Rt Hon Merlyn (Leeds S)


Bain, Mrs Margaret
Hooley, Frank
Roberts, Albert (Normanton)


Bates, Alf
Hooson, Emlyn
Robinson, Geoffrey


Bean, R. E.
Horam, John
Roderick, Caerwyn


Beith, A. J.
Howell, Rt Hon Denis (B'ham, Sm H)
Rodgers, George (Chorley)


Bishop, E. S.
Howells, Geraint (Cardigan)
Rodgers, Rt Hon William (Stockton)


Blenkinsop, Arthur
Hoyle, Doug (Nelson)
Ross, Stephen (Isle of Wight)


Boardman, H.
Huckfield, Les
Ross, Rt Hon W. (Kilmarnock)


Booth, Rt Hon Albert
Hughes, Rt Hon C. (Anglesey)
Rowlands, Ted


Boothroyd, Miss Betty
Hunter, Adam
Ryman, John


Bradley, Tom
Irvine, Rt Hon Sir A. (Edge Hill)
Sandelson, Neville


Brown, Hugh D. (Provan)
Irving, Rt Hon S. (Dartford)
Sheldon, Rt Hon Robert


Brown, Robert C. (Newcastle W)
Jackson, Colin (Brighouse)
Shore, Rt Hon Peter


Buchanan, Richard
Jackson, Miss Margaret (Lincoln)
Short, Mrs Renée (Wolv NE)


Callaghan, Jim (Middlelon &amp; P)
Jay, Rt Hon Douglas
Silkin, Rt Hon John (Deptford)


Campbell, Ian
John, Brynmor
Silkin, Rt Hon S. C. (Dulwich)


Cant, R. B.
Johnson, James (Hull West)
Small, William


Carter-Jones, Lewis
Johnson, Walter (Derby S)
Smith, John (N Lanarkshire)


Cartwright, John
Johnston, Russell (Inverness)
Snape, Peter


Castle, Rt Hon Barbara
Jones, Alec (Rhondda)
Spriggs, Leslie


Cocks, Rt Hon Michael
Jones, Barry (East Flint)
Stallard, A. W.


Coleman, Donald
Kaufman, Gerald
Steel, Rt Hon David


Conlan, Bernard
Lamble, David
Stewart, Rt Hon Donald


Corbett, Robin
Lamborn, Harry
Stewart, Rt Hon M. (Fulham)


Crawlord, Douglas
Lestor, Miss Joan (Eton and Slough)
Stoddart, David


Crawshaw, Richard
Lever, Rt Hon Harold
Stott, Roger


Crowther, Stan (Rotherham)
Lewis, Ron (Carlisle)
Strang, Gavin


Cryer, Bob
Lipton, Marcus
Strauss, Rt Hon G. R.


Cunningham, G. (Islington S)
Lomas, Kenneth
Summerskill, Hon Dr Shirley


Davidson, Arthur
Luard, Evan
Taylor, Mrs Ann (Bolton W)


Davies, Bryan (Enfield N)
Lyons, Edward (Bradford W)
Thomas, Jeffrey (Abertillery)


Davies, Denzil (Llanelli)
Mabon, Rt Hon Dr J. Dickson
Thomas, Mike (Newcastle E)


Davis, Clinton (Hackney C)
McCartney, Hugh
Thompson, George


Deakins, Eric
MacCormick, lain
Thorpe, Rt Hon Jeremy (N Devon)


Dean, Paul (N Somerset)
McElhone, Frank
Tierney, Sydney


Dell, Rt Hon Edmund
MacFarquhar, Roderick
Tomney, Frank


Dempsey, James
MacKenzie, Gregor
Torney, Tom


Doig, Peter
Mackintosh, John P.
Tuck, Raphael


Douglas-Mann, Bruce
McMillan, Tom (Glasgow C)
Varley, Rt Hon Eric G.


Dunn, James A.
McNamara, Kevin
Wainwright, Edwin (Dearne V)


Dunnett, Jack
Magee, Bryan
Walker, Harold (Doncaster)


Eadie, Alex
Mahon, Simon
Walker, Terry (Kingswood)


Ellis, John (Brigg &amp; Scun)
Mallalieu, J.P.W.
Ward, Michael


English, Michael
Meacher, Michael
Watkins, David


Ennals, David
Mendelson, John
Weetch, Ken


Evans, Fred (Caerphilly)
Millan, Rt Hon Bruce
Weitzman, David


Evans, Ioan (Aberdare)
Mitchell, Austin Vernon (Grimsby)
Welsh, Andrew


Ewing, Harry (Stirling)
Molloy, William
White, Frank R. (Bury)


Ewing, Mrs Winifred (Moray)
Moonman, Eric
White, James (Pollok)


Faulds, Andrew
Morris, Alfred (Wythenshawe)
Whitlock, William


Fitch, Alan (Wigan)
Morris, Charles R. (Openshaw)
Wigley, Dafydd


Foot, Rt Hon Michael
Morris, Rt Hon J. (Aberavon)
Willey, Rt Hon Frederick


Ford, Ben
Moyle, Roland
Williams, Rt Hon Alan (Swansea W)


Fraser, John (Lambeth, N'w'd)
Mulley, Rt Hon Frederick
Williams, Alan Lee (Hornch'ch)


Freeson, Reginald
Murray, Rt Hon Ronald King
Williams, Rt Hon Shirley (Hertford)


Freud, Clement
Noble, Mike
Williams, Sir Thomas (Warrington)


George, Bruce
Oakes, Gordon
Wilson, Alexander (Hamilton)


Gilbert, Dr John
Ogden, Eric
Wilson. Gordon (Dundee E)


Ginsburg, David
O'Halloran, Michael
Woodall, Alec


Golding, John
Orme, Rt Hon Stanley
Woof, Robert


Gourlay, Harry
Padley, Walter
Wrigglesworth, Ian


Graham, Ted
Palmer, Arthur
Young, David (Bolton E)


Grant, George (Morpeth)
Pardoe, John



Grant, John (Islington C)
Park, George
TELLERS FOR THE NOES:


Grocott, Bruce
Pavitt, Laurie
Mr. James Tinn and


Hamilton, James (Bothwell)
Pendry, Tom
Mr. Thomas Cox


Harper, Joseph
Penhaligon, David

Question accordingly negatived.

Mr. MacGregor: I beg to move Amendment No. 18, in page 11, line 14, leave out '£6,000' and insert '£9,000'.

The Second Deputy Chairman (Mr. Bryant Godman Irvine): With this we may take the following amendments:
No. 33, in page 11, line 14, leave out '£6,000' and insert '£8,000'.
No. 25, in page 11, leave out lines 27 to 36 and insert—


'Part of excess over £9,000
Higher rate


The first £2,000
40 per cent.


The next £2,000
45 per cent.


The next £2,000
50 per cent.


The next £2,000
60 per cent.


The remainder
70 per cent.'


No. 32, in page 11, leave out lines 27 to 36 and insert—


'Part of excess over £8,000
Higher rate


The first £2,000
40 per cent.


The next £2,000
45 per cent.


The next £2,000
50 per cent.


The next £2,000
55 per cent.


The next £2,000
60 per cent.


The next £5,000
65 per cent.


The next £5,000
70 per cent.


The remainder
75 per cent.'.

Mr. MacGregor: By way of preliminary I would make two remarks. The first is that I have for long felt that the problem of income tax goes right across all the ranges of income. I wish to make that clear at the outset. In this group of amendments I am not singling one particular group for tax reductions. I believe, and, had I had the opportunity to be called last night, I would have made this point, that this problem covers the whole range, from those on the lowest income scale, where we are all now familiar with the differentials between those in work and those out of work, to those on average earnings in work, to the widows and pensioners and all the scales below the level of income about which we are talking in this amendment.
Looking at differentials I feel that there is now a serious problem for the foreman and supervisor, whom I classify to some extent in the category of management and about whom I shall be talking mainly in this amendment. I have increasingly found that this attitude is taken in my constituency and among every company that I have talked to. I have looked at some alarming figures prepared by companies in my constituency showing that, when we combine the comparative increase in pay that foremen

and skilled workers receive and the massive effect of present levels of tax upon it, there is alarmingly little difference between the net take-home pay they receive and that of unskilled workers and people with fewer skills.
Unquestionably this is a serious problem which has still to be tackled. I make this point simply to emphasise to those, Labour Members, who may feel like rebutting this amendment by saying that we are singling out a special category, why I believe this general level of direct taxation exists right across the scale. I hope that we shall continue to make our attack right across the scale. It is not just management which is suffering, but the amendment, nevertheless, pinpoints a major problem which I think it right to identify.
As the Minister of State made clear in his reply to the last amendment, the cost of dealing with this particular group proportionate to total tax relief is very much less than it is for dealing with the other problem to which I have just referred. The reason the amendment is so important is that we are witnessing the start of a great deterioration in the morale of British management. Indeed, I believe that the crisis of morale is already upon us, especially among what one might describe as the cream at all levels.
If we do not remotivate the best of British management at all levels we are sunk. The issue is as serious as that. I hope to show that those who are most at risk are those in management whom we as a country can least afford to lose.
The second preliminary comment I wish to make is by way of commenting on the remarks of those hon. Members who supported the last amendment. Of course, I understand that they have an ideological commitment to an egalitarian society. The two sides of the House of Commons will never agree about that. I would plead with those hon. Members to understand that we as politicians have to be concerned with the practical and real world of business and commerce and, indeed, of the public sector as well.
Most people outside politics—clearly a very large proportion of the British population—simply do not share the political conviction of hon. Members opposite or their ideological commitments. The plain fact, as we have seen in the local


election results last week, is that many people are fed up with the constant process of having more of their income taken in tax and spent as politicians wish to spend it. What they are concerned about is doing the best for their companies, making the best use of their skills, getting the rewards which they believe are appropriate for the sacrifices that they have made in their earlier life at the expense of acquiring skills and qualifications, and providing for themselves and their families.
If we do not recognise that fact, we shall demotivate them and we shall also lose the very best among the young, who will simply go abroad because, as the figures clearly show, this country is now taxing them much more heavily than any of our competitor countries. Many young people are free to take their skills to those other countries. In fact, this point was well put last year by the Financial Secretary, who frequently pointed out the way that differentials between the highest paid and the lowest paid in this country, if we take after-tax incomes, are now very much narrower than those in practically every other country, not just our serious industrial competitors, but every other country, including the Communist world. I believe that differentials are far too narrow. The Financial Secretary and I are probably at one in recognising that the real problem is that differentials have now got to their present state.
Amendments Nos. 18 and 25 go together and Nos. 33 and 32 go together. My own view is that we should press Nos. 33 and 32. But the significance of Nos. 18 and 25 is that to some extent they indicate the erosion in tax over the past three years among the group about which I am concerned. I would say to Labour Members that it is not just a question of looking at the past year alone. What one has to look at is the trend of massive inflation over the past three years.
Amendments Nos. 18 and 25, curiously enough, are modest, because they are well below the level at which many of the tax thresholds should be if one simply takes into account erosion in terms of inflation. Starting from the situation in April 1973, the time of the last Conservative Budget, the starting point should be not £9,000 but £9,745. A Treasury

answer on 4th April confirmed that. At the 70 per cent. level the starting point should be over £23,000 and not, as in the amendment, £19,000. At the top rate of 83 per cent. rather than £21,000, as in the present Budget the figure should be over £38,000. These figures clearly demonstrate the erosion in net take-home pay of the management group directly caused as a result of inflation.
Equally, the amendments are modest when one looks at the international situation. Of course, this is also relevant with regard to the high level of taxation on the lower paid, but we have to recognise that the lower paid are not likely to be enticed abroad because of their particular skills, whereas management will be. It is relevant to consider the international comparisons.
I simply take two countries, Germany and the United States, to compare with ourselves. Again, according to a Treasury answer on 24th January, our 83 per cent. maximum rate begins at £21,000. In Germany the maximum rate is 56 per cent., starting at an equivalent of £64,000, and in the United States it is 50 per cent., starting at the equivalent of nearly £30,000. Those international comparisons clearly indicate that this group of amendments is very modest.
I come to the reasons why it is necessary to press this case this afternoon. If we have been listening properly to the whole range of our constituents, all of us will know that the problem of the erosion of net take-home pay and living standards of managers, whether they are what one might describe as front line—the foreman and the supervisor—middle managers, or senior managers, is now becoming one of the main areas of complaint. MI of us will know from the statements by the chairmen of many British companies—it is remarkable how this has become a common feature of such statements over the past few years—that more and more boards of directors are having to direct an undue proportion of their time to the problem of how to motivate their managements, how to keep them in this country, how to see that they are adequately rewarded, and how to keep them doing the jobs they are supposed to be doing.
6.0 p.m.
We all know from the many surveys which have been carried out, from the


head-hunter surveys and from those dealing with the emigration of British management—and this includes surveys by the Government's own Professional and Executive Recruitment Service—that the group that has suffered most in terms of a reduction of living standards over the last three to four years is middle and senior management. People at the lower and average income levels have begun in the last six to nine months to suffer for the first time a real reduction in their living standards.
But the plain fact is that management, and particularly higher management, has suffered over the last three years a reduction in living standards of about 25 per cent. in real terms. Now a simply staggering increase in gross pay is required to restore these living standards, and one of the major factors which has required this staggering increase is that tax now takes so much of the extra marginal income above £.10,000.
Of all the surveys I have seen on the subject that recently produced by the Opinion Research Centre is the best, and I wish to refer to it. It is the best because it is the most comprehensive and the most scientific. Rather than looking simply at groups of management, such as the British Institute of Management members, as some surveys have done, the ORC survey has looked across a broad range in Great Britain. It started with a sample of 106,000, which enabled it to come down to a group of 1,800 managers, and it studied them in depth.
It discovered that we are talking here about more than 1 million key decision takers in the country. In the debate on the last amendment the Minister quoted the figures of those who would have been brought into the higher tax bands had the adjustment not been made in the Budget proposals. He quoted the enormous increase in the figures of those who over the past three years have been brought into the higher tax bands. So we are talking about a comparatively small proportion of the total population, but about a very large number of people, and they are the key decision takers. They are to be found in the industrial and the commercial sectors and, to be fair, in the public sector.
Let us consider the results of the survey. Those results should seriously

concern every hon. Member, because if we are to get the economic growth and performance we seek, we depend on this group of people, and nothing that we as politicians do will make the difference that those people can make if they are properly motivated.
Almost 100,000 managers are serious enough about leaving Britain to have inquired about jobs abroad or about the regulations. More than 500,000 managers would consider taking a job abroad. What is particularly worrying about this aspect is that the majority who are really serious and who may carry out their intentions are among the young.
Those in their 30s and 40s face other difficulties which may prevent their ultimately fulfilling their intentions. I have in mind such factors as children at school. But among the young who do not have these problems the level of desire to seek jobs abroad is truly frightening. I heard today of a company which is being audited by six young chartered accountants aged between 23 and 24. Five of them have said that they are being attracted by offers abroad at this moment. Accountants at that age are among the better paid of our managers, and yet five out of six of this group are seriously considering leaving the country.
I am worried that if they go abroad and see the attractions of the net take-home pay levels and the living standards that they can enjoy there, and if they marry there and have children, it will be extremely difficult with today's tax rates to attract them back to this country.

Mr. Malcolm Rifkind: My hon. Friend is rightly concentrating on middle management, but does he agree that his arguments apply with equal force to the professions, particularly the medical profession? There we are suffering severe difficulties in persuading the most able members of that profession to remain in this country.

Mr. MacGregor: I have been using the word "managers" as a shorthand term, but, of course, we are talking about the middle and higher income groups, and they include the professions. Those are the skills that are so easily translatable abroad, and it is not surprising that we are losing people in that group as well.
A further result of the ORC survey is that about a fifth of the total work force of managers is doing less work outside normal hours than used to be the case. I am sure that the explanation is that pay is no longer a satisfactory reward and that therefore these people are seeking their rewards elsewhere. That means less commitment to the company, to the professional firm, or to the hospital for which they work.
One in four managers—which means well over 250,000—now say that it is not worth accepting promotion because of the effect of taxation on pay increases. I have talked to a number of such people in my constituency and around the country who have given me practical examples of where they have been offered promotion at what looked like an attractive increase in gross salary but where, after taking account of the cost of moving and the net addition to their take-home pay, they discovered that it was not worth while. This has become an increasing problem at home.
There is a strong reluctance, therefore, among these people to accept posts in other parts of the country, even with substantial gross increases in pay. I am sure that many companies could testify to the difficulties they have had in getting mobility among their managers, especially in this country, and in attracting them back from overseas for this very reason.

Sir John Hall: Does my hon. Friend agree that in trying to attract executives to another part of the country companies have to give very high salary increases, which distort the salary patterns within companies?

Mr. MacGregor: I agree with my hon. Friend. That is also a problem in attracting people back to this country. I am sure that we are all well aware of examples of this. ICI is a substantial example in point. Large numbers of middle managers overseas are being paid so much more in net take-home pay than their senior directors in this country that there is no possibility of attracting them back.
The majority of managers agree that the lack of financial reward is causing them to be less efficient and less enthusiastic

in their work. The ORC survey found that dishonesty is on the increase, and that is a factor of the tax levels which greatly worries me. It is particularly disturbing among this group, which has been one of the most law-abiding groups in the community. Nevertheless, it is beginning to be regarded in that group as legitimate to find ways around the tax system simply to protect one's standard of living. I deplore that, but I fear that the fault lies largely with the Government and with us in this House.
A tenth of managers are now moonlighting. Basically, they are spending a great deal of their time doing jobs sometimes for gain, but sometimes at home on a do-it-yourself basis. They are carrying out tasks for which they would previously have employed people but which they now find it more cost-effective to do themselves. They do that work at the expense of the effort they should be making in the export drive and for their companies at home.
The high level of direct tax has caused a concentration of fringe benefits. I dislike too much of a concentration of fringe benefits. I would much prefer to see a higher level of pay associated with lower tax so that people could spend their money as they wished. However, because of our high rates of tax, fringe benefits have become one of the inevitable ways of seeking to keep management working within a company or in the country. Last year's attack on fringe benefits simply made the situation worse.
That is a brief rundown of the main elements in the survey, and it reveals a most disturbing situation. It is clear that the Government's modest improvement, which puts managers back to roughly where they were last year—or perhaps makes them a little better off—is nothing like enough to deal with the rapid rundown in morale.
I readily concede that alterations to income tax are not the only answer. The incomes policy during the last two years, particularly the cut-off point at £8,500, has hit senior management hard. I accept that British management is sometimes not good enough, but we should be rewarding the brightest managers better and keeping them in this country. I fear that we are losing the brightest and that in some instances we are left with those who


are content just to coast along. That is not what we require as a country.
Some loss of morale was caused by the majority report of the Bullock Commmittee. It left many managers thinking that they were left out. Many of the Government's interventionist policies have not helped. Tax has made a big difference and the higher that one is up the incomes scale, the worse one's situation is. I am concerned not just about the rapid loss of morale among management but that the brightest and best of management, many of them young people, will go abroad and that many senior managers at home will make less effort.
It is clear from the survey that I mentioned that the better qualified are more likely to go abroad. Those higher up the scale with more responsibility are more likely to be better. The situation has become much worse during the last two or three years.
Tax measures of the kind proposed in this amendment will help. It is therefore right that we should put these amendments forward in order to draw attention to the problem and to urge upon the Government that what they have done is a start on the right road, but that it does not go anywhere like far enough.

Sir Geoffrey Howe: I rise to support my hon. Friend the Member for Norfolk, South (Mr. MacGregor) in moving Amendment No. 18 and, like him, to invite my hon. Friends to vote in support of Amendment No. 33.
The Committee cannot be too often or too forcefully reminded of the gross damage that has been done to the country and to our economy by the cripplingly high rates of tax imposed upon earned income. I endorse every word that my hon. Friend the Member for Norfolk, South said, particularly his argument that this is true of tax on earnings at all levels. However, in this debate we are concerned with those who pay tax at above the standard rate.
The rates themselves are much too high, and there is a far too low starting point for the higher rates. This has given rise to what my hon. Friend the Member for Guildford (Mr. Howell) rightly described as a management catastrophe—a catastrophe for all management groups in this country I include in those groups

all those who have skills and qualifications in professions, technology, and so on. I dare say that the Minister appreciates that this pattern of taxation is really economic nonsense. There is no economic justification for it whatsoever. It reduces the nation's talents and wealth as well as the nation's capacity to create jobs. It even reduces the yield from income tax, so that there is less money available for social spending—if that is what one wishes to do with the money.
John Methven, the Director General of the CBI, was not exaggerating when he said some months ago that we are
threatening to turn our country into a managerial leper colony.
It will be a leper colony not just for managers but for all people with all kinds of skills because we have turned our island into an island of fiscal insanity by maintaining, notwithstanding inflation, these increasingly severe rates of direct taxation.
The amendments that we are now discussing do not go far enough to restore the position that existed in 1973. They would not remedy the damage that has been done by inflation in imposing on these people tax increases that Parliament has not authorised but that have been increased by the stealthy process of inflation. I am not saying that, in the context of this Budget, we should make these precise reliefs but that we should vote for the amendment in order to underline the urgent importance of making much more substantial progress in lightening the tax burden even more than the Government have already started to do.
6.15 p.m.
The sensible target for a top rate of tax on earned income should not exceed 60p in the pound at any level. Even that would be above the top rate applicable in the United States, France and Germany where there are also much higher starting points for the higher tax rates.
Since the oil crisis and the world recession sacrifices have been necessary, but the discriminatory way in which sacrifices have been inflicted on people vital in our economy has caused an intolerable amount of damage. No doubt the House will recall the figures that were quoted by Kenneth Bond of GEC in a letter to The Times last year when he pointed that between 1972 and 1976 a


tremendous erosion had taken place in living standards. There has been at least a 10 per cent. reduction in take-home pay for skilled manual workers, 20 per cent. for managers; and for group managing directors the figure was 30 per cent.
We were told in the debate last year that the differential in earnings between manual workers and senior management had shrunk from 8 to 1 to 4 to 1 and it is now narrower than it is in the most non-egalitarian and capitalist of countries such as the Soviet Union and China. This will continue to have a grave effect on the morale of these key people, on their mobility within the country from job to job, and on their job motivation. The effect is, of course, also being expressed in the growing interest in emigration from this country.
My hon. Friend the Member for Norfolk, South cited some examples that were given in a report by the Opinion Research Centre. In order to supplement that information I refer the Committee to similar evidence produced by an inquiry conducted by the Overseas Recruitment Service and published in March 1977. It had questioned 991 people who had applied for appointments overseas in engineering, and in secretarial and medical work, as well as for jobs requiring other qualifications. It showed particularly disturbing features about the attitudes of the young. Among those aged between 31 and 50, whom the report described as being the bulk of people who were "trained, qualified and experienced", the second most important factor for wanting to leave the country was the present United Kingdom taxation system. The most important factor was the prospect of a higher salary abroad. Some 68 per cent. of those questioned put that first. We can do little about that while we are less well off than those in other European economies, but to add to that the double handicap of penal taxation is totally absurd.
The report said that the people wishing to work abroad
have already reached a certain level of responsibility, have plenty of working years ahead of them in which to deploy their working talent and experience".
These people are in the prime of life and have a lot to offer the country. They are

people the country can ill afford to lo without.
The proportion of those complaining about the tax system, according to the survey, rose in line with income. Among those earning more than £10,000 a year, 80 per cent. gave taxation as their main reason for wanting to leave the country. That is reflected in the emigration figures. More than three-quarters of those emigrating are less than 45 years old. If one studies the pattern of those going to Australia one finds that in 1970 about 40 per cent. of them were highly skilled or professional people. In 1975 the proportion was 64 per cent. Although the numbers may not be increasing greatly, the proportion of those with skills, people we can ill afford to lose, is rising steadily.
It is this pattern of taxation that has led to some of the nonsense contained in the Bill. There is provision in Schedule 7—a schedule four pages long—to give a series of licensed loopholes for those who are lucky enough to have overseas earnings. It is full of jargon about the qualifying tests, and the newspapers have been full of comment about whether one qualifies for relief if one leaves the country before or after midnight, whether one has one's toothbrush and leaves for more than two days at a time. Just think of all the travellers in business outside this country who will be thinking at least as much about whether they can get through the loopholes designed by Treasury Ministers as about what they should be doing for their companies. This is another ridiculous consequence of our absurd rates of taxation.
We also have to consider the whole jungle of benefits in kind that have been growing as a means of escaping from high taxation. They give an interesting sideline to what is happening, because next year the P.11.D starting point for taxation of benefits in kind goes up from £5,000 to £7,500, which is just keeping ahead of the level of average earnings. That provides us with another absurd illustration.
We should be wrong to ignore what is happening to those undertaking deep-sea diving in the North Sea. Many hon. Members will have read reports that the men who undertake this hazardous work rightly receive substantial rewards, but


that they are being pursued in order to have their tax status changed—to be transformed from self-employed people liable to tax under Schedule D so as to be brought within the net of taxation under Schedule E. It would not be right for me to comment on the tax status of any individual, but the reaction of these men to the imposition of the full, unqualified burden of our tax rates is one of great hostility, and they are indicating that they are likely to cease residing here for tax purposes and to cease to be available for this dangerous work. This is one of the consequences of pursuing to the limit a tax system with rates as high as they are.
In one report I have received from one of the larger diving contractor companies, it is said that they will shift their British divers to locations outside the United Kingdom and will replace them with foreign nationals. They foresee considerable difficulty in obtaining and retaining deep-sea expertise in British waters because of the imposition of these tax rates. According to the report the net result would seem to be
a downgrading of available expertise and an influx of foreign nationals to do much of the work which could and should be done by British divers. It follows that the Inland Revenue stands to lose thereby considerable sums in tax revenue anyway
Why in heaven's name has this country been driven into this absurd and lunatic position? It is because the hair-shirt hermits of the Tribune Group, who were here earlier, have had great success in peddling political myths to the great destruction of the economic health of this country. There are so many illusions and myths that it is worth spending a moment or two in identifying and destroying them.

Mr. Denzil Davies: The amendment will cost about £435 million. Can the right hon. and learned Gentleman tell us where he is going to get this money?

Sir G. Howe: The amendment is being proposed in the context of the case that we have argued many times, namely, that our tax system needs to shift away from direct to indirect taxation. Our case has been that the Government have recklessly and irresponsibly moved away from a 10 per cent. rate of VAT. If they returned to that they would get an extra £700 million. This is the folly. The Government must understand that they have cast away £700 million in revenue that would

have been raised by a 10 per cent. rate of VAT. Instead, they have locked themselves into a straitjacket and are attempting to justify a burden of direct taxation which is intolerable, lunatic and mad. They know where they could have got the resources. We are still paying the price for the profligate promises made by the Chancellor of the Exchequer in order to buy votes in October 1974. The sooner Ministers learn that, the better.
I return to the myths and illusions. The first concerns the impact of inflation on our tax system. In 1967, 55 people working for ICI were receiving salaries of more than £10,000 a year. In 1975, the figure was 1,377. On the face of it, the rich in ICI had multiplied twentyfold. The reality is that in 1975 only two people at ICI had take-home pay as large as that which they had received in 1967. Despite the multiplication of inflationary, illusionary salaries, the great mass of these people were worse off.
Another myth being propagated by the Left—[HON. MEMBERS "Where are they?"] They are drying and cleaning their hair shirts ready for the next foray.

Mr. Ridley: One of them has left his shirt behind.

Sir G. Howe: I hope that it does not find its way on to the back of a Treasury Minister. Treasury Ministers are sufficiently austere. My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) is right to cross the Chamber to investigate what has been left behind. It may be a sleeping member of the Tribune Group.
The second illusion is the gross pay illusion in which hon. Members opposite below the Gangway talk about salaries of £10,000 and £15,000 a year. They are totally misleading people about the level of rewards being paid. At last year's tax rates a salary of £10,000 a year is worth £6,600, or £120 net a week, which is not far above the level of average earnings.
The third myth is that we live in some sort of closed economy or a siege economy in which we can insulate our-selves from those places around the world to which our people can emigrate. I do not know where members of the Tribune Group live or move, but I find it almost impossible to go to any significant employing organisation without receiving


complaints about the departure of two or three key men to much higher paid jobs outside this country.
The fourth illusion propagated by the Tribune Group comes when they say that they may be persuaded by our arguments but that they can carry on in the short run because they will be able to put things right in a different way in the long run. By then, however, the people to whom I am referring will all have fled.
The fifth illusion, and one which has been propagated by the Chancellor of the Exchequer from time to time, is that chaps do not work for take-home pay, that they are motivated by massive job satisfaction—such as, presumably, the pleasures of carrying dispatch boxes from one IMF conference to another or of waving to the cameras outside No. 11 Downing Street. That is an odd argument from Ministers who have been noticeably successful in material terms. I am sure that the Chancellor must get some pleasure from his farmstead in Sussex, his homestead in Highgate, his occupation of No. 11, the car, the chauffeur and the rest. Even for so altruistic a character, material considerations must have played some part in motivating him. Material rewards matter in a free society. Even in an unfree society on the other side of the Iron Curtain material rewards are not conspicuous by their absence.
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The sixth illusion is that higher rewards are of only little consequence to those who receive them. These people who deserve to face lower taxes and to receive better net take-home pay are the minority who play the key part in creating wealth for the rest of the community. To persist in these policies without change is to drive them away, to the great disadvantage of this country.
All these things flow from the extent to which Labour Members have enforced upon conventional wisdom in this country the belief that equality is something to be pursued for its own sake. If we continue to pursue equality in this way we shall not merely be perpetuating the management catastrophe about which my hon. Friend spoke. We shall be endorsing a prescription for the pauperisation

of our country. That is why I support the amendment.

Mr. Budgen: I hope I shall be forgiven, Sir Myer, if I take the peroration of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) a little further, because I think that he and my hon. Friend the Member for Norfolk, South (Mr. MacGregor) relied most of all upon what I call the efficiency argument. They relied upon the argument that the many worthy people who earn high salaries work primarily. or at least partly, for money, and that if we do not give them adequate net incomes they are thereby frustrated in their objectives, they work less hard, they tend to emigrate, they tend to look at ways in which they can preserve their real position by tax dodges, and all the rest.
It is a good argument and one with which I agree, but the argument surely goes much wider than that. There is a danger about that argument because it accepts the premise of the Puritans on the Labour Benches. It suggests that those who are rich are also worthy, and surely that is a dangerous fallacy.
The reasons for people being rich are diverse. They are dependent upon the chances of the market. They are in some instances dependent upon persons having odd and particular skills, quite unconnected with the moral worth of their character, or they may equally be wealthy because of the oddity of the chances of having been born to rich parents or having inherited vast wealth.
All of these are a necessary part of a diverse and free society, but if we say that everybody who is rich is worthy the Puritans on the Labour Benches are perfectly entitled to say "Look at that manager earning £12,000 a year. He is having a very pleasant way of life. Of course he has to take some difficult decisions, but for my part"—as the man on the shop floor might say—"I would much rather be jetting around the world for 12 grand a year than working at my lathe and doing a boring, repetitive job". If we counter that argument by saying that the manager is in some way morally better and taking a more responsible rôle in society, surely we are only storing up for ourselves a spirit of envy from the Labour Benches.
We say, do we not, that it is from the chances of the market, the oddities of life, that some people are richer than others? It does not mean that they are any better. It does not necessarily mean that they are intellectually any abler. They are merely richer, and their riches are a necessary part of a free and diverse society in which people are capable of taking independent action and of taking independent points of view. If we say that, we are surely making it more bearable for others who have not the good fortune to be so benefited in the odd and changing society in which we live.
I say, therefore, that we support the amendment not just for the managers, who may be very worthy, and not just for those who work very hard, although I dare say they do not work any harder than people who spend their time cleaning out lavatories all day. We say that rich people are a necessary part of society. It matters not how they got their riches or how they retain their riches. We need rich people in order that we may have an independent and diverse society. We on the Conservative Benches support the concept of independent private property.

Mr. John Wakeham: I should like to think that this Budget and this Finance Bill mark a watershed in the Socialist way of life that we have had in this country for a number of years. I should like to think that they mark a great change in direction. We hope that it will be the last Socialist Budget for a good many years, but it is important to remember in this context that we have had a Socialist Government for 10 out of the last 13 years. These amendments are designed to help the welcome change of direction to move considerably further in the light of the damage which has been done to our tax system during the period since 1964.
I do not think we fully realise what a social revolution has occurred in this country as a result of the changes in the tax system made by the two Labour Governments in the period from 1964 to 1970 and from 1974 to 1977.
When the Labour Government were returned in 1964, a person on average earnings retained some 90 per cent. of his take-home pay after direct taxation and national insurance contributions. Such a person now retains some 75 percent.

—a reduction of 15 per cent. For a person on five times average earnings, the respective figures are 73 per cent. in 1964 and under 50 per cent. now—a reduction of about 23 per cent. For a person on 10 times average earnings, the proportion left after payment of tax and national insurance has dropped from 62 per cent. to 34 per cent.
Looking at those figures in another way, comparing the net after-tax income in 1964 with the present time and comparing a person on average earnings with a person on 10 times average earnings, the differential was seven times in 1974 and it is now four times. As my right hon. and learned Friend the member for Surrey, East (Sir G. Howe) said, that is very much the sort of after-tax differential that may be seen in many countries in the world, particularly a number of those behind the Iron Curtain.
There has, therefore, been a very substantial switch in resources as a result of having a Labour Government in this country over a long period. I do not believe that Labour Members below the Gangway should be dissatisfied with the ravages which the Labour Government have wrought with our system of direct taxation.
Taking the period of about four years since the last Conservative Budget, there has been an increase in retail prices of some 70 per cent., and it is interesting to look at the increase in indirect taxes. Taxes on expenditure have gone up broadly by about the same figure. The increase in rates has been broadly around the 70 per cent. mark. National insurance contributions have increased by perhaps a bit less—about 65 per cent. But the increase in direct taxation has been about 130 per cent.
I believe, therefore, that the very modest change in direction which has been forced upon the Government by events ought to be looked at in the context of a series of Governments who have shifted taxation very substantially indeed away from indirect to direct taxation, and last year's effort is a very uncharacteristic example of what Labour Governments have been doing to this country over a considerable number of years. They have managed to do what they have done only by reason of high inflation coupled with high taxation. Without high inflation,


no Chancellor of the Exchequer could have got away with the social revolution brought about by the present Socialist Government. Inflation has been the ally of the Socialist endeavour to impose high direct taxation.
I support these amendments because they go some way to encourage the change which we have seen in this Budget—the first change in a long time. I hope that the amendments will be agreed to.

Mr. Peter Walker: In fairness to the Chancellor of the Exchequer, one must point out that he recognises the problem which has been outlined in this debate. He recognises it every year in the period between September and January and he forgets it every year in the period between March and April.
This was the second major Budget prior to which the Chancellor made many promises that those who had been particularly hard hit in middle management and in higher management would be thought of in the preparation of his Budget plans. It is a great technique adopted by the present Chancellor that for many months of the year he keeps people content and happy on false promises and raises hopes that are never fulfilled. In that sphere he has been almost more disastrous than he has been in a good many other spheres which compete for that accolade.
For three years, middle management and higher management groups in British industry have been hard hit by a combination of the Chancellor's policies. The incomes policy operated by the Government in the last two years has been harder and tougher on that group of people than on anybody else. They have suffered a combination of tough policies and a complete freeze on their incomes, and they have also suffered because of levels of tax and the effect on mortgage interest rates. Therefore, there is a whole band of highly important people in society whose standards of living have dropped constantly for three years—probably in total by as much as one-third. No group of people can go through the process of adjusting themselves to such a drop in their standards of living without suffering immense difficulty and anxiety.
I wish to underline two points in asking the Government to consider this amendment carefully. The first is that, in the Government's endeavours to obtain a successful phase 3 in terms of income policy, one of the great problems in Britain is that the whole of British management is in a mood in which it would like to see the end of incomes policy, if only for a few months, so that it could obtain the adjustment which it has lost over the past three years. The fact that management is in that mood at present is not helpful to the Government.
Although many recognise the necessity for the Government to be successful in obtaining some form of wage restraint because of the incomes policy which is operated against them—a feeling of unfairness compared with the rest of the country—this, in combination with tax levels, leads them to believe that they have lost out in this particular phase.
6.45 p.m. 
Secondly, the Government must recognise the effect which their policy has had on services for which they are directly responsible. In this context, no section has been harder hit than the National Health Service. As a result, a whole body of our most skilled surgeons are developing a nine-till-five working mentality, having been frustrated by years of lack of recognition of their talents, skills and efforts. This has led in the last two or three years to a massive increase in waiting lists at almost every hospital to see consultants. This is directly related to the manner in which these men of great skill have been treated.
Another factor, which the Government may try to brush aside, is the perpetual argument of the pay trend. I warn the Government that if they ignore the trends of the past few years—and the lack of reward to a fair number of people is the barometer by which one can judge future trends—they will be in for a nasty surprise. Many management recruiting agencies in Europe find that the one place in which they can recruit talent easily is Great Britain. They are making a greater attempt to recruit people from this country than ever before.
Let me try to point out what is likely to happen in the next five or 10 years in terms of some of the new emerging economies such as Iran, Venezuela and


Brazil. All have immense wealth and considerable plans for industrial development but a total lack of managerial ability.
All those Governments have decided that they need to recruit on a large scale. A recent governmental commission in Venezuela has recommended that in the next five years it should try to recruit from abroad between 250,000 and 500,000 skilled and managerial personnel to assist in development plans. If those Governments are looking for countries in which to recruit that talent, Britain is the obvious target. Britain has the men with ability, skill and great managerial background, but it also has a Government who clobber such people with high taxes. That makes it easier for them to recruit in Britain than to recruit in Germany, France, the United States or any other major industrial country.
I hope that the Government will not brush this amendment aside and replace it with yet further promises to consider the lot of middle and higher management in the months to come. Before the 1976 Budget the Chancellor of the Exchequer, in speech after speech to employers' organisations and groups of managers, said how much he felt for their problems and said that he intended to recognise them. In the following Budget he did nothing for them. He took the same course in the months before the present Budget. Again, he has done virtually nothing. If this goes on much longer, this Government may experience the fact that such men will fail to pursue their occupations with the energy which the country so desperately needs.

Mr. Rifkind: It is astonishing that when the Committee is considering a major amendment to this central piece of legislation the Benches behind the Treasury Minister are occupied by only one reclining Member and one equally reclining garment. It is not surprising that support for the Government in the House is comparable with the support given to the Budget by the country and the electorate.
I wish to make two short points in support of the amendment. My hon. Friend the Member for Norfolk, South (Mr. MacGregor) sought to deal with the problems of middle management and the crisis facing industry. I do not dissent from his remarks, but I wish to emphasise that it

is not only middle management or industry which is suffering from the present high level of taxation. There are a number of other people and groups within the community whose support and continued presence in this country are necessary for our general well-being. I refer to the professions, and particularly to the medical profession. Those professions have in the last few years suffered a severe drain of sorely needed talent to other countries, for exactly the same reasons as apply to industry.
Similar considerations apply to those with literary, artistic and other scarce talents. In some respects those products may not be admired by everybody, but the wealth of the country depends on our being able to retain people with talent. They are the creative groups, the professional men and the entrepreneurs, and they all share something in common—namely, the possession of scarce skills.
I wish slightly to disagree with my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), who suggested that in some way the possession of a higher income is something arbitrary and is either never or rarely related to the ability of those in the group who receive it. I believe that to a large extent high income in all countries, whether capitalist or Socialist, goes to those with rare skills, and it is those people whom the community most particularly needs.
I also warn the Government that this country faces the threat of the emigration of our skilled minority to a far greater extent than the rest of Europe could suffer even if its taxation were similarly severe. We have both the advantage and the disadvantage of speaking an international language. Therefore, disaffected members of our community can contemplate starting a new career and a new life in many other countries in the rest of the world far more easily than those belonging to a community whose native language is spoken only in their own country. It is easy for someone in this country suffering from the effects of taxation to consider starting a new career in the United States, Canada, Australia, New Zealand, South Africa or many of the other countries where English is the common language.
The language problem can often dissuade a person from emigrating when all


the other factors in his life might encourage him in the other direction. Even if Germany, France, Italy, Spain or Greece had serious taxation problems or its own difficulties, this extra factor might keep some of its skilled people at home despite the other factors which might persuade them to go elsewhere. I hope that the Minister will take into account that, because it is relatively easy for the skilled members of our community to begin a new career and a new life in other English-speaking countries, we must make special efforts to persuade them to remain here.
In sonic respects the Government are gradually seeing the light, and there is now an element of common sense in their whole attitude towards taxation. Four or five years ago it would have been impossible to envisage a Socialist Government offering income tax incentives to the trade union movement in order to secure co-operation over a prices and incomes policy. Four or five years ago the current orthodoxy was that direct taxation was a privilege that the middle classes and the higher income groups were supposed to enjoy in order to benefit the rest of the community. Now even the present pig-headed Government are realising that high direct taxation leads to suffering and hardship in the community as a whole. If it has taken an economic blizzard to bring them to their senses on this matter, there is at least a hope that the problems faced by other income groups will lead the Government to see similar common sense in regard to them in the not-too-distant future.
The problem is that we cannot afford to wait for that to come about simply by a process of slow infusion of intelligence into the minds of those on the Treasury Bench. I remind the Minister that although the seriousness of the problem is now emphasised by the difficulties in industry, it is in the professions and creative groups, those engaged in literary and other creativity, that we are losing out to many other countries in a way that no community can afford for long. I hope that the Government will take that into account. If we cannot restore the level of allowances and the tax position of those groups to what they were a mere three years ago, at least we can

do significantly better than was proposed in the Budget.

Mr. A. P. Costain: Most of the arguments I had intended to advance have already been put, so I shall be brief.
I can confirm from my own business experience that there is a drain of brains from this country and that it is having a serious effect. Does the Minister not realise that if we drive away the income group with which we are here concerned there will be a tremendous effect on employment? If the people with pleasant gardens and a standard of life which reflects well on this country, people who already have heavy commitments, are not allowed to have a reasonable spendable income, we shall create a country which has no quality products, and the standard of our shops will go down. The people in that group, such as the women who spend more on their dresses and thus give employment to specialist firms, have an important effect on employment. If we are to continue as a country of which we can be proud, it is a group that needs to be encouraged.

Mr. John Pardoe: I find myself in complete agreement with almost everything that has been said in the debate so far. These high rates of tax are ridiculous both in absolute terms and by international comparison.
I do not share the anti-egalitarian views expressed by the right hon. and learned Member for Surrey, East (Sir G. Howe). I believe in greater equality, and I do not think that our low-income groups are yet over-privileged, but I challenge the view held by many on the Labour Benches that income tax is an egalitarian tax. To a large extent it has worked the other way and is not a very efficient redistributor of income.
That was pointed out many years ago by, I think, Professer Titmuss in a book in which he said that, although the Inland Revenue's figures tended to convince everybody that income tax had been a redistributor of income, there was in fact so large an incentive to reduce the taxable income at those higher levels by all manner of allowances and non-taxable benefits that the Inland Revenue grossly overstated its redistributive effects.


That argument certainly convinced me then, 15 or 20 years ago, and if it was true then it must be even more true today.
Income tax is too high because it is too high a proportion of our total tax burden. It has been said in the debates yesterday and today that we do not suffer from being a high-tax country, if we take the total of our tax revenue as a proportion of our gross national product. That is certainly true. The problem with all rates of income tax is that we are bedevilled by the fact that we have allowed ourselves to take far too great a share of the total tax revenue in income tax because it is too darned easy to do.
Inflation does it for Governments without Parliament having to vote it. Therefore, general indexation of the allowances and the bands is a principle which the Committee must at some time come to accept, although I certainly agree with the right hon. and learned Gentleman about the need to raise the bands to the levels at which they were, in line with the rise in the cost of living, the fall in the value of money. I hope that this will become part of a general principle of indexation accepted by the Conservative Party.
The fact that income tax is too high, and at these levels of tax much too high, is now generally accepted in the Committee, though not universally, as we saw in the previous debate. It is fairly generally accepted among all shades of political opinion. As we have seen from speeches by the Chancellor, the Chief Secretary and other Ministers, including the Prime Minister, it is certainly accepted by them.
This year's Budget is a step in the direction of reducing the high dependence on income tax, but we cannot change the burden of income tax in isolation. We must do it as part of a gradual—I hope not too gradual—plan to change from taxes on incomes to taxes on expenditure. People tend to think that one is advocating increasing VAT to an extraordinary rate when one suggests a change to taxes on expenditure, but there are many taxes on expenditure.
The most important deficiency in our tax system at present in terms of its revenue yield is the corporate sector. The British corporate sector, both nationalised and private, is contributing a much lower proportion of the total tax burden than is

the corporate sector in nearly all our industrial competitor countries. There is not much that we can do about that through corporation tax, because profits are so low. Therefore, corporation tax looks high, at 52 per cent., but in real terms it is no higher than in all other countries. In a number of Western industrial countries corporation tax is a higher burden on industry generally.

Mr. Peter Hordern: I do not believe that the hon. Gentleman is correct in saying that profits are low. That is not the case with companies. The position is that investment allowances are exceedingly generous. Is the hon. Gentleman suggesting on behalf of the Liberal Party that they should not be as generous as they now are?

7.0 p.m.

Mr. Pardoe: Yes. I am indeed. I share the views of many Conservative Members who question the relevance of investment allowances in terms of creating investment. I do not believe that any Government have succeeded in bribing business men to invest more through investment allowances.
One interesting document to emerge from the Government in recent years is a large blue tome, which was the result of a seminar organised by the economics adviser to the Department of Industry, Professor Alan Peacock. It is an assemblage of learned papers on the effect of various investment incentives. The conclusion of each of the papers is that the experts do not have the foggiest idea of what the incentives are doing to investment.
The hon. Member for Horsham and Crawley (Mr. Hordern) has put his finger on a point that I wanted to make and which constitutes the crux of the problem. We in this country, in both corporation and income tax terms, have high tax rates and high allowances. The rates look ridiculously large. In some cases they are ridiculous. However, they look even more ridiculous than they are because of the high allowances. That is true of the 52 per cent. corporation tax. Because there are large investment allowances, the yield is low. I deal with these other taxes only because I believe that we must consider ways of reducing income tax, especially at the upper levels, in the context of how we raise revenue from other sources.

Sir John Hall: Does the hon. Gentleman agree that, if we are looking for a way of switching the burden of tax more on to corporations, the tax on corporations is on profits which in real terms often do not exist? Therefore, the Government are getting revenue out of the assets of a company, not out of its pocket.

Mr. Pardoe: I entirely agree with the hon. Gentleman. Over the years some company chairmen, until they got wise to it, were making themselves look ludicrous by getting up at annual general meetings and announcing the splendid profits which had been made when they had not been made at all looked at in real terms. The real return in British industry is catastrophically low—about 3½ per cent. last year. It is difficult to say now what it is, because profits are beginning to rise.
Taxable income in Britain in 1976–77 was £48·7 billion. That is the total tax base for personal income. Allowances and deductions amounted to £33·1 billion. I wonder whether it is sensible to have a tax system which relies so much on high rates of tax which people often quote, certainly in the international context. These rates are not real in any meaningful sense because so many allowances are set against them.
The reduction of these tax rates is desirable. Indeed, I sometimes think that it might be better to have none at all. I should dearly love to abolish income tax if we could find a better tax for it. The graduated expenditure tax advocated by the Meade Commission is a step in that direction. The Meade Commission pointed out that income tax is a tax not solely on income, but on income less certain types of savings. It would be better to say that it is a tax on income less all types of savings rather than to try to distort the market in favour of institutionalised savings.

Mr. MacGregor: I accept the point made by the hon. Gentleman that there are allowances, though they are not as generous as he makes out, and many international comparisons take them into account. But does he agree that, because the higher rates or tax bands are so narrow, there is a massive disincentive at these income levels irrespective of allowances?

Mr. Pardoe: I agree entirely with the hon. Gentleman.

The First Deputy Chairman (Sir Myer Galpern): Order. The hon. Member for Cornwall, North (Mr. Pardoe) has digressed considerably from the substance of the amendment. However, if he is about to discuss the abolition of income tax, I should remind him that it is not part of the Jubilee celebrations.

Mr. Pardoe: No, Sir Myer, I was not about to debate the abolition of income tax. I was making the point that all personal taxes, not just these upper rates, are too high.
I agree with the hon. Member for Norfolk, South (Mr. MacGregor) that the bands are now so narrow that there is a substantial disincentive at that level. Indeed, there is a disincentive throughout the income tax scale. Yesterday there was reference to low levels of tax and the poverty trap. The disincentive is even greater at that level.
Whatever economic and utilitarian arguments we advance for a reduction in the top rates of tax, regrettably we are politicians. The amendment calls for substantial increases this year in net take-home pay for a small, though important, section of the community. We are talking about a married couple with two children and an income of £8,000 or more a year. Indeed, the amendment would put it up to about £10,000 a year or more. We are proposing considerable increases in net take-home pay for such people. Frankly, I do not believe that we could get away with that. We must take account of the feelings of the British people, who are not in a mood at the moment to accept that such increases should be made.

Sir John Hall: I cannot understand how the hon. Gentleman can advance this argument when he has tabled an amendment which would have the effect that no one should pay more than 50 per cent. of his income in tax, and that could benefit only those earning about £30,000 or more a year.

Mr. Pardoe: Indeed. With the permission of the Chair, which I sought from your predecessor, Sir Myer, I was going to discuss a small aspect of the amendment.
I was about to say that the best start this year would be a fairly modest proposal which would at least announce that we are not the most grotesquely overtaxed nation in the world. An amendment—for example, Amendment No. 24—stipulating that no one should pay more than 50 per cent. of his income in tax would affect a small number of people and would cost very little. I do not think that the Treasury knows how much it would cost, because it is a difficult calculation to make. I suspect that such a proposal would affect very few people in this country. We are talking about people with incomes well over £20,000 a year. However, they are bound to have allowances which are not normally taken into account—for example, various pension arrangements and so on.
It is absolute nonsense for anyone in a civilised, efficient, competent country to be asked to pay more than 50 per cent. of his earned income in tax to the Government. The fact that such a proposal applies only to a small number of people means that we could dispense with the fiction of being branded throughout the world as a country with high tax rates. It is well known that high tax rates have an effect on management selection, about which the right hon. and learned Member for Surrey, East was talking. People, wherever they are, tend to regard Britain as a grotesquely and extravagantly high tax country. Britain is a fairly high tax country in terms of income tax, but the rates are not all that high. We might as well carry the amendment as a start in the process of announcing to the world that we intend to put our house in order.
I hope that over the next few years it will be possible to bring sanity into the tax system, to reduce the burden of income tax both absolutely and as a proportion of the total revenue received by the Government and, through an overall reform of the tax system, to make it politically possible to reduce the upper rates of tax. However, as I shall argue later on investment tax, if I catch your eye, Sir Meyer, I believe that the quid pro quo for that is a heavy wealth tax. I do not believe that my constituents or the great majority of people in this country would accept a reduction in these high rates of tax without a quid pro quo.

Mr. Ian Gow: We have heard a rather typical speech from the deputy leader of the Liberal Party.

Mr. Pardoe: I am not deputy leader We do not have one.

Mr. Gow: The hon. Member for Cornwall, North (Mr. Pardoe) is perhaps the loss-leader of the Liberal Party.
He began by saying that he did not share the anti-egalitarian views of my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe). He went on to say that he was a warm supporter of the principles behind the amendment. Later he was compelled to admit that he had drafted Amendment No. 24. The argument that he used to justify the principle behind that amendment was that it would not cost the Treasury very much money to exempt from tax half of what a man had in his earnings. He argued a moment ago that it would be politically impossible to have a substantial reduction in earned income tax. As usual the hon. Member is trying to have his argument both ways. He ended up in great confusion when he told us that he was a keen advocate of a massive wealth tax. We shall see how far he can impress his views on the Government and whether we shall have a massive wealth tax in the next Budget

Mr. Pardoe: I have pushed my views on to the Tory Party. The majority of Members of the Select Committee investigating a wealth tax supported my proposals.

Mr. Gow: The hon. Member is gravely misleading the House. My hon. Friend the Member for Blaby (Mr. Lawson) and I were members of that Committee.

Sir John Hall: We already have a wealth tax in the capital gains tax.

Mr. Gow: We have an even bigger wealth tax in the form of inflation.
The hon. Member for Cornwall, North referred to a book by Professor Titmuss. It would be better if he read the book written by my right hon. Friend, "The Ascent of Britain". Perhaps a copy could be presented to the spokesman of the Liberal Party.
One of the strange features of our time is that just before Christmas each year


the Chancellor of the Exchequer composes a letter. It is addressed to the Managing Director of the International Monetary Fund. In some ways it is a model letter. My only criticism of the copy which the Chancellor of the Exchequer places in the Library is that we are not let into the secret of the greeting at the beginning and the salutation at the end. That is written in manuscript. Last year it was sent on 15th December. The relevant paragraph is paragraph 12. It highlights precisely the amendment moved by my right hon. Friend.
Paragraph 12 finishes with a reference to the need to reduce the burden of taxation. It begins with another important Socialist measure. The paragraph states:
As a result of … a sale during 1977–78 of British Petroleum shares calculated to yield £500 million, the aim is to hold the PSBR at £8·7 billion in that year.
The hon. Member for Cornwall, North said that there were only two ingredients in the measures that we are discussing to reduce the burden of direct taxation—namely, what proportion of revenue should be raised by direct taxation and what proportion by indirect taxation. There is another crucial ingredient that the hon. Member left out. What is to be the total level of public expenditure?
It is upon those elements that these amendments depend. We need to bend down the curve of public expenditure and to bend down the curve of direct taxation. That will mean a substantial increase in indirect taxation. The hon. Member for Cornwall, North did not mention the need to reduce public expenditure. For him, indiscriminate food and housing subsidies are acceptable. We assert that there should be a substantial reduction in public expenditure as well as on taxation on direct income.
7.15 p.m.
Paragraph 12 continues:
My own belief"—
that is the belief of the Chancellor—
is that the present levels of direct taxation have proved discouraging to effort and efficiency, and if they were to continue unchanged they could threaten the improvement in our economic performance which is an essential objective of the Government's strategy.
Who would put up the taxes to the level about which the Chancellor of the

Exchequer was obliged to write to Dr. Witteveen and say that they had not reached a level at which they were a disincentive? Until the Chancellor was compelled to have these discussions with Dr. Witteveen we did not hear about the disincentive effect of taxation. We were all misled into believing that perhaps the Chancellor of the Exchequer would have the courage of his convictions and do something radical about direct rates of tax.
There was an opportunity to follow up the famous letter of 15th December in this Finance Bill but the Chancellor has failed to take it. That is why we tabled these amendments. I hope that in the further discussions between the Government and Dr. Witteveen in the autumn the Government will listen closely to what he says and to the advice that he gives on this crucial element of direct taxation.
The brain drain, the brain flood and lack of motivation are dangers that will come to pass. The argument by the hon. Member for Cornwall, North—that the cost of making these reductions is small—should weigh heavily with the Government. A little more courage and imagination from Ministers would be welcome.

Mr. Denzil Davies: I shall speak mainly to Amendment No. 33, although it is not much different from the amendment tabled by the hon. Member for Norfolk, South (Mr. MacGregor). The only difference of substance is that the official Opposition's amendment is slightly more modest in cost—to the tune of about £40 million. Nevertheless, the Opposition amendment seeks a further immediate reflation of £435 million into the economy. The right hon. and learned Member for Surrey, East (Sir G. Howe) shakes his head, but he is asking for a further taxation reduction of £435 million.
In my brief experience of Finance Bill Committees I have discovered that when we debate capital taxes the Opposition manage to find an impecunious disabled lady living somewhere in the country who happens to be the beneficiary of a discretionary trust in the Cayman Islands. The Opposition always argue that if we introduce a particular clause it will cause that lady difficulties. When we debate income tax, the Opposition talk of


managers working for the good of the country and say that taxes should be reduced for their benefit.
That might be the case, but the hon. Member for Wolverhampton, South-West (Mr. Budgen) was more honest. He said that we were concerned with making rich men and keeping men rich. He implied that talk about worthy managers was to cloak the amendments with a certain amount of respectability. [Interruption.] This is my own brief. Having sat here for hours, I am entitled to make my own speech.
We are not concerned with the tax rates of managers and of no one else, or, indeed, the tax rates of only the worthy surgeon or physician. We are concerned with reducing the tax rates for everyone who pays at the higher rates. There is no amendment seeking to reduce the taxes on managers of multinational companies or managers of ball-bearing companies in the Midlands or whatever other worthy activities in which managers are involved. Indeed, if the Government were to introduce an amendment—even if we were able to frame one—to reduce the higher rates of tax for managers and surgeons and to leave as they are higher rates for solicitors, bankers, stockbrokers, lawyers and other worthy people, we should hear long speeches from Conservative Members about discrimination, danger to the economy, the balance of payments and invisibles and reductions in taxation in general.
Therefore, I do not think that we should take too seriously the long speeches, particularly that of the right hon. and learned Member for Surrey, East, about the need to reduce taxes for managers. The Bill will reduce taxation for everyone earning these higher levels of income.
Who are these people who earn more than £20,000 a year? I do not know. No doubt some are managers, but I suspect that the majority are not managers. I have no figures to support that view, but I have a feeling that most, perhaps, are either self-employed—I am not saying that they are not worthy people—or are professional people such as solicitors, accountants and economic advisers, and perhaps some civil servants. Perhaps the majority are not managers. Therefore, we should not make too much

of the point that here we are seeking to hand tax back—if that is the right phrase—or to reduce the burden of taxation to the extent of £435 million for these worthy managers.
I asked the right hon. and learned Member for Surrey, East "Where will you find the money?" He said "We shall raise indirect taxation". Then he specified that he would raise the rate of value added tax, to 10 per cent. presumably, to pay for this £435 million. Therefore, the Opposition are quite prepared to relieve this burden of £435 million of tax on the higher income groups and to do so by ensuring that the British public in general pay the bill through increasing the cost of living—that is the effect of raising the rate of VAT to 10 per cent.—on everyone in order to pay for this £435 million. That was what the right hon. and learned Gentleman said.
In addition to that, there are other amendments to the Bill and no doubt we shall hear the same story again: "We shall pay for this by raising the rate of VAT." I read in the Daily Mail today an article saying that the Tory Party would now abolish rates and pay for the extra £2,000 million, presumably, again by raising VAT. I do not know what the rate of VAT will ultimately be when the Opposition have finished with it.
However, the £435 million is to be paid for, as the Opposition would have it, by increasing the cost of living. No doubt the British public will be very interested in that proposition.
Then we come to another word—"reflation". That was not mentioned at all by Opposition Members. That is curious, especially as the hon. Member for Eastbourne (Mr. Gow) has taken part in the debate. He was very concerned—I understand his concern—that we should not reflate the economy because that creates inflation, yet we have had speech after speech seeking a reflation of £435 million. Last night the hon. Member for Guildford (Mr. Howell) said that the Government have a bottle from which they take a reflationary swig from time to time. However, it seems that the Opposition have the bottle. They are the people who want to reflate—tonight to the tune of £435 million.
One wonders about reflation. When it benefits the higher paid it is all right for society, according to the Opposition, but when it benefits the lower and middle income groups there is apparently a danger.

Sir G. Howe: The hon. Gentleman must understand that the purpose of the debate is to press as strongly as we can on the present Government the folly that they are committing in maintaining this level of taxation on these kinds of taxpayers. This is a serious amendment on which we shall be voting to underline the importance of the message. It is not suggesting a method of balancing the management of the economy. The House of Commons is the place in which we argue cases of this nature. That is the right way of doing it. But a change of this kind would have to be made in the context of the reconstruction of the Budget. We shall be voting to drive upon the Minister the importance of the principles of the amendment.

Mr. Davies: It seems that the amendment has been moved to raise the issue, which the right hon. and learned Gentleman considers to be important, but I think that when we vote we should do so seriously. It is a specific vote and not about an argument or a principle. It is about reducing taxation by £435 million for people who earn £5,000 and more a year. The right hon. and learned Gentleman cannot get out of it in that way. He is presumably saying "We shall vote, but we hope we shall lose". He is concerned not with winning the vote but with making a point. That is rather discourteous to the procedures of the House of Commons.
Once again, with reflation to the extent of £435 million, it is said that inflation here is a good thing and that there is nothing wrong with it. The Opposition say "We want this kind of reflation, even though it makes inflation worse and benefits one particular group". [Interruption.] The right hon. and learned Gentleman should not mutter. He has made his point. He is on a bad point.
Finally, we have, of course, accepted that the marginal rates of tax—we are talking about a marginal rate of 83 per cent.; it is not an effective rate—on international comparisons, looking at

what managers are paid in other countries by multinational companies, mean that managers in this country are probably worse off in terms of after-tax income than managers in many other countries. We accept that we have to compete in this market, whether or not we like it, and we have to try to get to a situation in which this disparity is to some extent evened out.
That is what the Government have tried to do by the Budget. We have had a previous debate on the matter. The Sunday Times Business News—a very weighty and influential newspaper—was quoted at me. Apparently, The Sunday Times thought that the £270 million that we are already giving—the increase in the threshold and the other rates—meant that executives were laughing in the boardrooms, or the washrooms, or wherever The Sunday Times thought executives were laughing.
If we added another £435 million—that is what the amendment is about—to that £270 million, we should be going much too far to benefit one group when there are so many other groups in our society who have suffered perhaps more than some of those at the top end of the income scale. It would be completely indefensible, especially considering the need to secure a third year of incomes policy. It would be wrong to do it. We should be going much too far.
The Government have made a start on the problem. I do not pretend that we have gone as far as we can. There are problems. I think that we should go further and reduce the top rate of income tax. However, this year we have gone as far as we can by reducing income tax by £2¼ billion altogether.
The right hon. and learned Member for Surrey, East says that the Opposition will be voting but that they are not serious about it. I ask him to withdraw the amendment, not only because it is intrinsically bad but because the Opposition, in pressing it to a vote, are not keen on winning it. They are playing games with our procedures. I suggest that if they have any responsibility at all, they should withdraw the amendment. They have made their points and expressed their arguments, but now they are afraid to withdraw the amendment. I suggest to the Committee that if the Opposition do


not withdraw the amendment it should be thrown out.

Mr. MacGregor: I think that we should prefer to make our point on Amendment No. 33 and not on Amendment No. 18. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: No. 33, in page 11, line 14, leave out '£6,000' and insert '£8,000'.—[Sir G. Howe.]

Question put, That the amendment be made:—

The Committee divided: Ayes 208, Noes 235.

Division No. 129]
AYES
[7.29 p.m.


Adley, Robert
Gower, Sir Raymond (Barry)
Morrison, Charles (Devizes)


Alison, Michael
Gray, Hamish
Morrison, Hon Peter (Chester)


Amery, Rt Hon Julian
Griffiths, Eldon
Mudd, David


Arnold, Tom
Grist, Ian
Neave, Airey


Atkins, Rt Hon H. (Spelthorne)
Gryils, Michael
Nelson, Anthony


Awdry, Daniel
Hall, Sir John
Neubert, Michael


Bain, Mrs Margaret
Hamilton, Michael (Salisbury)
Newton, Tony


Baker, Kenneth
Hampson, Dr Keith
Onslow, Cranley


Bell, Ronald
Hannam, John
Oppenheim, Mrs Sally


Benyon, W.
Harrison, Col Sir Harwood (Eye)
Page, John (Harrow West)


Berry, Hon Anthony
Harvie Anderson, Rt Hon Miss
Page, Rt Hon R. Graham (Crosby)


Biffen, John
Havers, Sir Michael
Page, Richard (Workington)


Biggs-Davison, John
Hayhoe, Barney
Parkinson, Cecil


Blaker, Peter
Henderson, Douglas
Pattie, Geoffrey


Body, Richard
Higgins, Terence L.
Percival, Ian


Bottomley, Peter
Hodgson, Robin
Peyton, Rt Hon John


Bowden, A. (Brighton, Kemptown)
Holland, Philip
Price, David (Eastleigh)


Boyson, Dr Rhodes (Brent)
Hordern, Peter
Prior, Rt Hon James


Braine, Sir Bernard
Howe, Rt Hon Sir Geoffrey
Pym, Rt Hon Francis


Brittan, Leon
Howell, David (Guildford)
Rathbone, Tim


Brocklebank-Fowler, C.
Hunt, John (Bromley)
Rawlinson, Rt Hon Sir Peter


Brooke, Peter
Hurd, Douglas
Rees, Peter (Dover &amp; Deal)


Brotherton, Michael
Hutchison, Michael Clark
Rees-Davies, W. R.


Brown, Sir Edward (Bath)
James, David
Renton, Rt Hon Sir D. (Hunts)


Bryan, Sir Paul
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Renton, Tim (Mid-Sussex)


Buchanan-Smith, Alick
Johnson Smith, G. (E Grinstead)
Rhodes James, R.


Buck, Antony
Jones, Arthur (Daventry)
Ridley, Hon Nicholas


Budgen, Nick
Jopling, Michael
Rlfkind, Malcolm


Bulmer, Esmond
Kaberry, Sir Donald
Roberts, Michael (Cardiff NW)


Burden, F. A.
King, Evelyn (South Dorset)
Roberts, Wyn (Conway)


Carlisle, Mark
King, Tom (Bridgwater)
Rossi, Hugh (Hornsey)


Chalker, Mrs Lynda
Knight, Mrs Jill
Rost, Peter (SE Derbyshire)


Churchill, W. S.
Knox, David
St. John-Stevas, Norman


Clark, Alan (Plymouth, Sutton)
Latham, Michael (Melton)
Scott, Nicholas


Clark, William (Croydon S)
Lawrence, Ivan
Shaw, Giles (Pudsey)


Clarke, Kenneth (Rushcliffe)
Lawson, Nigel
Shelton, William (Streatham)


Clegg, Walter
Lester, Jim (Beeston)
Shepherd, Colin


Cockcroft, John
Lewis, Kenneth (Rutland)
Shersby, Michael


Cope, John
Lloyd, Ian
Silvester, Fred


Cormack, Patrick
Loveridge, John
Sims, Roger


Costain, A. P.
McAdden, Sir Stephen
Sinclair, Sir George


Crawlord, Douglas
MacCormick, lain
Skeet, T.H.H.


Crowder, F. P.
McCrindle, Robert
Smith, Timothy John (Ashfield)


Dodsworth, Geoffrey
Macfarlane, Nell
Speed, Keith


Douglas-Hamilton, Lord James
MacGregor, John
Spence, John


Drayson, Burnaby
Mackay, Andrew James
Spicer, Michael (S Worcester)


Durant, Tony
Macmillan, Rt Hon W. (Farnham)
Sproat, Iain


Eden, Rt Hon Sir John
McNair-Wilson, M. (Newbury)
Stainton, Keith


Elliott, Sir William
McNair-Wilson, P. (New Forest)
Stanbrook, Ivor


Emery, peter
Madel, David
Steen, Anthony (Wavertree)


Evans, Gwynfor (Carmarthen)
Marshall, Michael (Arundel)
Stewart, Rt Hon Donald


Ewing, Mrs Winifred (Moray)
Mates, Michael
Stewart, Ian (Hitchin)


Eyre, Reginald
Mather, Carol
Stokes, John


Fairbairn, Nicholas
Maude, Angus
Stradling Thomas, J.


Fairgrieve, Russell
Maudling, Rt Hon Reginald
Tapsell, Peter


Fell, Anthony
Mawby, Ray
Taylor, Teddy (Cathcart)


Fisher, Sir Nigel
Mavhew, Patrick
Tebbit, Norman


Fletcher, Alex (Edinburgh N)
Meyer, Sir Anthony
Temple-Morris, Peter


Forman, Nigel
Miller, Hal (Bromsgrove)
Thomas, Rt Hon P. (Hendon S)


Fox, Marcus
Mills, Peter
Thompson, George


Gardiner, George (Reigate)
Miscampbell, Norman
Townsend, Cyril D.


Gardner, Edward (S Fylde)
Moate, Roger
Viggers, Peter


Gilmour, Sir John (East Fife)
Monro, Hector
Wakeham, John


Glyn, Dr Alan
Montgomery, Fergus
Walder, David (Clitheroe)


Godber, Rt Hon Joseph
Moore, John (Croydon C)
Walker, Rt Hon P. (Worcester)


Goodlad, Alastair
Morgan, Geraint
Weatherill, Bernard


Gorst, John
Morgan-Giles, Rear-Admiral
Wells, John


Gow, Ian (Eastbourne)
Morris, Michael (Northampton S)
Welsh, Andrew




Wigley, Dafydd
Wlnterton, Nicholas
TELLERS FOR THE AYES:


Wilson, Gordon (Dundee E)
Younger, Hon George
Mr. Spencer Le Merchant and Sir George Young




NOES


Abse, Leo
Hamilton, James (Bothwell)
Orme, Rt Hon Stanley


Allaun, Frank
Harrison, Walter (Wakefield)
Ovenden, John


Archer, Peter
Hart, Rt Hon Judith
Padley, Walter


Armstrong, Ernest
Hatton, Frank
Palmer, Arthur


Ashley, Jack
Hayman, Mrs Helene
Pardoe, John


Ashton, Joe
Heffer, Eric S.
Park, George


Atkins, Ronald (Preston N)
Hooley, Frank
Pavitt, Laurie


Atkinson, Norman
Hooson, Emlyn
Pendry, Tom


Bates, Alf
Horam, John
Penhaligon, David


Bean, R. E.
Howell, Rt Hon Denis (B'ham, Sm H)
Price, William (Rugby)


Beith, A. J.
Howells, Geraint (Cardigan)
Radice, Giles


Bennett, Andrew (Stockport N)
Hoyle, Doug (Nelson)
Rees, Rt Hon Merlyn (Leeds S)


Bidwell, Sydney
Huckfield, Les
Richardson, Miss Jo


Bishop, E. S.
Hughes, Robert (Aberdeen N)
Roberts, Albert (Normanton)


Blenkinsop, Arthur
Hughes, Roy (Newport)
Roberts, Gwilym (Cannock)


Boardman, H.
Hunter, Adam
Robinson, Geoffrey


Booth, Rt Hon Albert
Irvine, Rt Hon Sir A. (Edge Hill)
Roderick, Caerwyn


Boothroyd, Miss Betty
Irving, Rt Hon S. (Dartford)
Rodgers, George (Chorley)


Brown, Hugh D. (Provan)
Jackson, Colin (Brighouse)
Rooker, J. W.


Buchan, Norman
Jackson, Miss Margaret (Lincoln)
Rose, Paul B.


Buchanan, Richard
Jay, Rt Hon Douglas
Ross, Stephen (Isle of Wight)


Callaghan, Jim (Middleton &amp; P)
Jeger, Mrs Lena
Ross, Rt Hon W. (Kilmarnock)


Campbell, Ian
Jenkins, Hugh (Putney)
Rowlands, Ted


Canavan Dennis
John, Brynmor
Ryman, John


Cant, R. B.
Johnson, James (Hull West)
Sedgemore, Brian


Carmichael, Neil
Johnson, Walter (Derby S)
Selby, Harry


Carter-Jones, Lewis
Johnston, Russell (Inverness)
Sheldon, Rt Hon Robert


Cartwright, John
Jones, Alec (Rhondda)
Shore, Rt Hon Peter


Castle, Rt Hon Barbara
Jones, Barry (East Flint)
Short, Mrs Renée (Wolv NE)


Clemitson, Ivor
Kaufman, Gerald
Silkin, Rt Hon John (Deptford)


Cocks, Rt Hon Michael
Kelley, Richard
Silkin, Rt Hon S. C. (Dulwich)


Cohen, Stanley
Kerr, Russell
Silverman, Julius


Coleman, Donald
Kilroy-Silk, Robert
Skinner, Dennis


Colquhoun, Ms Maureen
Kinnock, Neil
Small, William


Conlan, Bernard
Lambie, David
Smith, Cyril (Rochdale)


Cook, Robin F. (Edin C)
Lamborn, Harry
Smith, John (N Lanarkshire)


Corbett, Robin
Lamond, James
Spearing, Nigel


Cowans, Harry
Latham, Arthur (Paddington)
Spriggs, Leslie


Cox, Thomas (Tooting)
Lee, John
Stallard, A. W.


Crawshaw, Richard
Lestor, Miss Joan (Eton and Slough)
Stewart, Rt Hon M. (Fulham)


Crowther, Stan (Rotherham)
Lever, Rt Hon Harold
Stoddart, David


Cryer, Bob
Lewis, Ron (Carlisle)
Stott, Roger


Cunningham, G. (Islington S)
Loyden, Eddie
Strang, Gavin


Davidson, Arthur
Luard, Evan
Summerskill, Hon Dr Shirley


Davies, Bryan (Enfield N)
Lyon, Alexander (York)
Taylor, Mrs Ann (Bolton W)


Davies, Denzil (Llanelli)
Lyons, Edward (Bradford W)
Thomas, Jeffrey (Abertillery)


Davis, Clinton (Hackney C)
Mabon, Rt Hon Dr J. Dickson
Thomas, Mike (Newcastle E)


Deakins, Eric
McCartncy, Hugh
Thomas, Ron (Bristol NW)


Dean, Joseph (Leeds West)
McDonald, Dr Oonagh
Thorne, Stan (Preston South)


Dell, Rt Hon Edmund
McElhone, Frank
Thorpe, Rt Hon Jeremy (N Devon)


Dempsey, James
MacFarquhar, Roderick
Tierney, Sydney


Doig, Peter
MacKenzie, Gregor
Tinn, James


Douglas-Mann, Bruce
Mackintosh, John P.
Torney, Tom


Dunn, James A.
McMillan, Tom (Glasgow C)
Tugendhat, Christopher


Dunnett, Jack
McNamara, Kevin
Varley, Rt Hon Eric G.


Eadie, Alex
Madden, Max
Wainwright, Edwin (Dearne V)


Edge, Geoff
Mahon, Simon
Walker, Terry (Kingswood)


Ellis, John (Brigg &amp; Scun)
Mallalieu, J.P.W.
Ward, Michael


English, Michael
Marks, Kenneth
Watkins, David


Evans, Fred (Caerphilly)
Marshall, Jim (Leicester S)
Weitzman, David


Evans, Ioan (Aberdare)
Maynard, Miss Joan
White, Frank R. (Bury)


Ewing, Harry (Stirling)
Meacher, Michael
White, James (Pollok)


Faulds, Andrew
Mendelson, John
Whitlock, William


Flannery, Martin
Mikardo, Ian
Willey, Rt Hon Frederick


Fletcher, Ted (Darlington)
Millan, Rt Hon Bruce
Williams, Rt Hon Alan (Swansea W)


Foot, Rt Hon Michael
Miller, Dr M. S. (E Kilbride)
Williams, Rt Hon Shirley (Hertford)


Ford, Ben
Miller, Mrs Millie (Ilford N)
Williams, Sir Thomas (Warrington)


Fowler, Gerald (The Wrakin)
Mitchell, Austin Vernon (Grimsby)
Wilson, Alexander (Hamilton)


Fraser, John (Lambeth, N'w'd)
Molloy, William
Wilson, Rt Hon Sir Harold (Huyton)


Freeson, Reginald
Moonman, Eric
Wilson, William (Coventry SE)


Garrett, John (Norwich S)
Morris, Alfred (Wythenshawe)
Wise, Mrs Audrey


George, Bruce
Morris, Charles R. (Openshaw)
Woodall, Alec


Gilbert, Dr John
Morris, Rt Hon J. (Aberavon)
Woof, Robert


Golding, John
Moyle, Roland
Wrigglesworth, Ian


Gould, Bryan
Murray, Rt Hon Ronald King
Young, David (Bolton E)


Gourlay, Harry
Newens, Stanley



Graham, Ted
Noble, Mike
TELLERS FOR THE NOES:


Grant, George (Morpeth)
Oakes, Gordon
Mr. Peter Snape and


Grant, John (Islington C)
Ogden, Eric
Mr. Joseph Harper.


Grocott, Bruce
O'Halloran, Michael

Question accordingly negatived.

Mr. Hordern: I beg to move Amendment No. 19, in page 11, leave out lines 18 to 25 and insert
'£4,000 at the additional rate of 15 per cent.'.
This amendment, which seeks to raise the threshold at which the investment income surcharge becomes payable, is a modest proposal. I hope that I shall not be told that, because it would cost £200 million, or whatever the figure is, the amendment is disgraceful. It would simply restore the position of someone who had an investment income up to the surcharge limit in 1973.
Although it can be argued strongly that the surcharge after the £4,000 limit which we suggest would be a penal rate at 15 per cent., it would do no more than restore the position to what it was when the Conservatives were last in power. All that has happened is that inflation has moved the effective value of the surcharge from £2,000 in 1973 to £4,000 today.
I believe that we should be able to expect whole-hearted Liberal support on the amendment. I am glad that the hon. Member for Cornwall, North (Mr. Pardoe) is with us, since I want to remind him of something he said in the equivalent debate last year. I do not know whether he was deputy leader of his party then, but at least as his party's economic spokesman he said:
I do not wish to amplify the arguments which have already been deployed, but rather to recap on a previous period. During that Utopian period when democracy was restored to our parliamentary institutions, when the Liberal Party held the balance of power—the quicker it happens again the better—what good sense was produced. We managed to defeat the Treasury Bench and to increase the threshold for investment income to £2,000. It is a pity we cannot do that again tonight".—[Official Report, 11th May 1977; Vol. 911, c. 383.]
But we can do that again tonight. If one revalorised what we did then with the help of the Liberal Party, one would get exactly what is proposed in the amendment. I look forward to the hon. Gentleman's support. Otherwise it would be the rankest inconsistency, and I know that he would not wish anyone to accuse him of that.
We should remember that the basic rate in 1973 was not 35 per cent. but 30 per cent. We are, therefore, talking in a

different order of magnitude about the surcharge on the basic rate.
If, as was argued strongly at the time, things were very difficult for retired people then, they are so much more difficult for retired people living on investment income today. For example, let us suppose that by some miraculous advice a retired married couple had been able to increase their investment income from £2,000 to £4,000—which would allow only for the increase in the cost of living over the period. I know of no such wizard, but let us suppose that that had happened. As a result, they would he paying the top marginal rate of 50 per cent. on the marginal level of investment income over and above the £2,000. That in any case would be a penal rate of tax, even supposing that the married couple had managed to achieve an extraordinary increase in investment income.
7.45 p.m. 
However, far from there being any increase in investment income, it is more likely that those who are retired and depend on investment income have their investments in fixed-interest securities and have received no real increase in investment income. They have had to bear the extraordinary increase in the cost of living over that time, the increase in rates and other increases of every kind. These are the people who have suffered most from this restraint.
The Government have recognised this situation in some degree by allowing these people to have index-linked bonds up to a stake of £500. However, if the Government decided to increase the amount to, say £1,000, these people would stand a risk before long of paying surtax and the investment income surcharge simply through having bonds which managed to keep their real value. That is the extraordinary position that we have reached under this Government.
Since, I understand, about 42 per cent. of investment income surcharge payers are retired, there is a strong case for the total exemption of pensioners. I understand from the reply to a Question that I put down a few months ago that the cost would be about £130 million. If the Minister of State says that we cannot afford that sum, let him tell us what it would cost to exempt all pensioners with investment incomes of less than


£4,000. I do not know what that cost would be, but at any rate the case for such an exemption must be very strong.
This case is not simply one for comparison with other people in society: it is a very strong case in equity. These people cannot extort larger wage increases. They have to depend largely on fixed-interest security and they receive no increases in the value of their investment income.
It is also useful to recall the position of some of those to whom the Minister of State said earlier that the Government are particularly favourable—the small managers. It is not out of this world to suggest that a middle manager would be able to buy his own house and to set up a life policy, leaving both the house and the matured policy to his widow when he died. In such circumstances it is likely that the widow would sell the house as it is probable that it would be too large. It is likely that she would find herself with a sum of £20,000 after buying herself a small bungalow or flat, and perhaps over £20,000 from the proceeds of the life policy.
Again, there is the extraordinary distinction between the person who receives a pension from an institution or firm and the person who has saved throughout his life and receives investment income. That is a distinction that is difficult to justify. However, the sums that I have mentioned represent a perfectly ordinary expectation for a middle manager to be able to secure for his widow. One would have thought that it was an admirable thing to do.
That sum when invested would secure an income which would be liable now—especially if the widow were over 60 years of age—to the surcharge on the investment income. That would lead to a marginal rate of 50 per cent. I say that that is an inhuman rate of tax for a person in the situation that I have outlined. We are not talking about very rich people. We are talking about the ordinary person's expectation. We are talking about a sum that a widow should be able to receive as a result of the hard work of her husband and through the sale of a house and a life policy.

Mr. Denzil Davies: I am sure that the hon. Gentleman wishes to make it

clear that the surcharge would not apply to the first £1,500 of income. If the widow is between 60 and 65, the surcharge starts to apply only after she has received £1,500.

Mr. Hordern: I am aware of that. However, even now an income of about £1,500 can easily be secured through investment in long-dated Government bonds. It is still possible to secure 13 per cent. or 14 per cent. without any great difficulty. In those circumstances the marginal rate would be 50 per cent. That is an extortionate rate and one that cannot be found in any other civilised country.
Let us take the example of someone who has been made an award for an industrial injury. Compensation is given in a lump sum. Alternatively, compensation might be awarded to someone who has been wounded, for example, in action in Northern Ireland. The investment income from such an award is liable to the surcharge. I do not think that that is defensible, either.
I had a case of a constituent who was run over and who suffered severe injuries. The constituent was awarded a sum that is not substantial. He is able to work but finds great difficulty in obtaining employment. I understand that he has been seeking employment for more than six months. As the Committee knows, after that period he is no longer entitled to any unemployment benefit. He has been told that to qualify for social security benefit he must relinquish the award that he obtained from the industrial tribunal.
That is a disgraceful state of affairs. As it is not especially relevant to the amendment I hasten to pass on. I mentioned the matter in passing because of the disgraceful treatment of those who receive awards, whether for industrial injuries or personal injury, and the treatment of investment income from such awards. It is equally disgraceful whether it is an award of the sort to which I have referred or income originating from capital that has been invested.
It is well known that about 37 per cent. of all farm land in England and Wales is farmed by tenant farmers. The position has been well made out by the farming community that it receives a low return on its investment and takes a considerable interest in the way that


the land is farmed. It is recognised that management expenses and expenses incurred in running the land can be offset against income before tax. The principle is already allowed. Surely there is a strong case for exempting tenanted land from the surcharge on investment income and making no distinction between investment and earned income.
If we consider the level of the surcharge on investment income, it is clear that we live in a different environment from any other country. In most countries there is no distinction between earned income and investment income. Perhaps even more important, no other country starts tax from such low thresholds and at such high rates.
I thought it would be interesting to get some figures. I am told that for a 40 per cent. rate to apply in France—in France I do not think that there is any distinction between earned and investment income—£10,500 of taxable earnings would have to be received. In Germany there would have to be £8,000 of taxable earnings for a 30 per cent. rate. In the United States there would have to be earnings of £31,000 for a 30 per cent. rate. In the United Kingdom a retired couple pay 50 per cent. marginal tax on taxable investment income of £2,500. I ask the Committee to compare those extraordinary figures.
If we consider the expediency of those who have saved hard for their old age and compare their position with the ordinary expectation of any such couple in any other civilised country, whether it is a country in Western Europe or the United States, the comparison is appalling. When the Minister of State says, as he does so often, that we have to think of the position of the less fortunate members of our society—we must think of them and, of course, that is an acceptable argument—we must also remember the extraordinary disparity of treatment of those here who have saved hard and worked hard all their lives and the treatment of such people in any other country.
I believe that our system represents a gross injustice for retired people. If this is how we treat retired people, it is difficult to justify calling ourselves a civilised country, as other countries can, bearing in mind the way in which they

treat those who have worked hard and saved hard all their lives.
The truth is that the Labour Party has never cared very much for savers, whether they are small investors or large. This is not merely a matter of fair treatment for those who have saved hard and worked hard all their lives. There is a substantial economic factor that must be considered. Under the present arrangements there is no incentive to save. There is no incentive for any private person to make any disposition of his earnings after tax, such as they must be with tax as it is, in order to save. That is partly because the return on investment is so small, especially with dividend restraint and the present level of inflation. Any return on investment must appear to be very poor when compared with the present level of inflation.
The effect of the present position has been seen clearly in the past five years. The private investor has been getting out of his savings. That has been happening on an increasing scale over the past five years. The fact is that 10 years ago private investors were responsible for about 70 per cent. of the turnover in the equity market on the Stock Exchange. At that time the institutions were responsible for about 30 per cent. of that turnover. Three years ago private investors were responsible for 44 per cent. of the turnover while institutional investors were responsible for 56 per cent.
The latest figures that I have received from the Stock Exchange indicate that the private sector has declined to 32 per cent. of all the turnover in equities while the institutions have increased their turnover to 68 per cent. It cannot be very long before private investors cease to be a force of any sort in the equity market.
It might be asked whether it matters if the institutions are to dominate the stock markets, as they do at present. Indeed, they are increasingly bound to do so. For a start, it makes a nonsense of dividend restraint. As a high proportion of investment is carried out by institutional investors, most dividend restraint is being applied to the investments of pension funds and insurance companies. Most of their members work in factories and are to be found on the shop floor. Those most affected by the change and turn of events are those whom the Labour


Party fondly imagines to be its supporters. I believe that the effect of dividend restraint is wholly harmful to the longterm prospects of those in pension funds. This is becoming increasingly known, not least by the trade unions themselves.
8 p.m.
It is also likely to have another effect—that their investment is becoming increasingly tied to the public sector borrowing requirement. Referring to last year, the Financial Statement states:
By late June and early July, a prospective conflict was emerging between public and private borrowing.
It is easy to forget, less than a year later, what the position was then. There was strong competition for funds, and the Government were at that time totally unable to raise funds on the Stock Exchange through the sale of gilt-edged securities.
Now the position has changed. The Government do not find it so difficult to raise funds by the sale of gilt-edged securities. But the reason is that private investors and institutional funds have long since stopped investing in equities because the return on Government securities was so large. So there is a direct link between the size of the public sector borrowing requirement and the institutional direction of investment.
If the public sector borrowing requirement is large, and the Government are dependent on the massive sale of gilt-edged securities to the non-bank public, that can only lead to the result that institutions must invest in gilt-edged securities. The effect is that the outlook for the market in equities becomes depressed and the ability of companies to raise money on the Stock Exchange is very adversely affected. Equities are doing so well because the equity market has been flat on its back for a long time and only very recently are the institutions turning their investing in Government securities towards equities. The market has gone so far up because of the very small presence of private investors. It is almost wholly institutional investment, and is likely to become more so.
The position is clear. We do not need the Wilson Committee to tell us about it. The larger the public sector borrowing

requirement, the more the institutions will invest in gilt-edged securities and the less money there will be available for industry. It is a clear course of events. I hope that it will be put plainly to the Wilson Committee.
If ever there was a useless line of inquiry, it is that of the Wilson Committee. Talking about a Royal Commission, the right hon. Member for Huyton (Sir H. Wilson) said that it would take minutes and waste years. I do not suppose that he will waste years, but he will take minutes, and what is to be found out about the situation is already well known.
The surcharge on investment income has had a considerable effect on the level of private savings in industry generally. All those who are in the position of depending on investment income—and a large proportion of them are elderly people—have tended to invest in safe, gilt-edged securities. They have seen over the years the value of their investments decline—many of them by half, let alone what it is in real terms. These securities are still depressed. The least we can do is try to restore some kind of increase in earnings and some reduction of taxation of those who might rightly be called the most hard-pressed members of our society.

Sir John Hall: I shall be brief, if only because I have spoken on this subject already on various occasions, particularly in the Finance Bill Committee last year. Since then, and with this Bill, we have had a modest but inadequate improvement of the situation.
I support everything said by my hon. Friend the Member for Horsham and Crawley (Mr. Hordern). He is right to say that the Labour Party dislikes savers. There seems to be in that party a deep, almost subconscious, dislike of investment income. There is the idea that, somehow or other those with investment income, however small, are wealthy people and can be clobbered without particular regard to the effect upon them as individuals.
I shall confine myself to one example, since many others have been given, of the damaging impact of this tax. Such cases must be common throughout the country. The man in Question retired


with an endowment policy that he had accumulated in many years' service to the company of which he was a longstanding employee. I drew attention on Second Reading to the savage contrast between the way in which public service pensioners with indexed pensions are treated and the way in which those retiring on endowment policies or company pension schemes with invested savings are treated.
This gentleman was able to commute a considerable amount of his pension. Quite naturally and rightly, because the pension element is fixed, he commuted a large part in the hope that he would be able to invest to offset inflation. But he finds that his investment is not bringing in as much as he had hoped, because of dividend restraint. The increase in dividends has fallen far behind the increase in the cost of living in recent years. It has been impossibe to keep up with inflation by investing in equities in the hope that one's income will increase appropriately.
He invested in equities and various other forms of investment, but then found that his total investment income brought him within the 10 per cent. surcharge. Thus, in addition to his normal rate of tax, he pays the surcharge of 10 per cent. Indeed, he goes on to 15 per cent.
We should contrast his situation with that of the retired public servant. This man has for many years served a company well. He gets his pension at the end of it, but transmutes part of it into capital, which now bears the burden of the surcharge. The public servant retires on the same sort of pension arrangement, but with an indexed pension increased automatically year by year to take account of increases in the cost of living.
What is the justification for treating the income of a man who retired in the same circumstances, who has built up a pension on the same length of service but to a company, differently from the income of those, whether public servants or not, who escape this surcharge altogether? Had this gentleman retained his whole pension without commuting part, he would have escaped the surcharge on the total pension. But because he tried to cover himself against inflation, he is penalised.
That is just one example. There must be hundreds of other such examples of people on modest incomes, built up over a lifetime, on which they had hoped they would be able to have a reasonable standard of living. What is the point of treating them as if they were on large incomes of £30,000 or £40,000 a year? There is no justice in it. I shall be interested to hear the Minister of State trying to justify this type of taxation on people unfortunate enough to have small incomes derived from savings income.

Mr. Peter Rees: I am moved to intervene, although not so much by the merits of the amendment, which is modest, perhaps over modest. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) moved it in the eloquent and persuasive manner that one expects of him since he speaks with such authority. I intervene more to encourage the Minister to display perhaps some ministerial valour by resisting the outpourings of antediluvian envy of his hon. Friends, particularly the hon. Member for Coventry, South-West (Mrs. Wise), whose absence from the Chamber is marked by a mohair—or perhaps it is a cashmere—pullover draped on the Back Benches. We may discover that the Chancellor of the Exchequer wants not 98 per cent. but only 95 per cent. of the higher levels of investment income.
I believe that it is dangerous to distinguish on moral, or maybe political, grounds between various categories of income. If we venture into that area we shall be compelled to base judgments on the relative merits of our various occupations, and how will the Minister distinguish between the income earned by nurses, policemen—I take these categories at random—bookmakers, Members of Parliament, or members of the Prime Minister's private office? Are they to be awarded a differing moral scale and be subject to tax at differing rates?
I am sure that the Minister of State, if not his hon. Friends below the Gangway, will soon recognise the political and practical difficulties of such a course. In any event, the distinction between earned and unearned income is extremely capricious. Why should a landowner—I take a particularly emotive category in the absence from the Chamber of the Tribune Group—be subject to the investment income


surcharge on his rental income when the Committee knows that the management of property, whether agricultural or urban, is particularly complex in this day and age? Why should he be subject to the surcharge when, if he chooses to employ an estate agent, that estate agent would not be subject to investment income surcharge on the fees that he received?
Or let us take the case of a retired farmer. It may be in the experience of the Committee that although farmers' incomes are somewhat low, they depend on the capital appreciation of their property. When the farmer comes to retire, he sells that property and invests. He is left with what is laughingly described as investment income, which in fact is the fruits of a particularly arduous career. Why should farmers be subject to the surcharge of 15 per cent. while those in other occupations are treated as though they received earned income?
My hon. Friend the Member for Wycombe (Sir J. Hall) aptly told us of the person who chooses to commute his retirement annuity and invest it, and perhaps that of his wife. Why should he be treated in any different guise from a person who receives a Civil Service annuity? Distinctions, at the end of the day, are arbitrary and capricious. As my hon. Friend the Member for Horsham and Crawley pointed out, 42 per cent. of the investment income surcharge is paid by taxpayers over the age of 65, which shows that we are dealing in most cases with savings income and not a windfall of the kind apparently so offensive to those hon. Members sitting, or rather absent from, below the Gangway.
I hope the Committee will forgive me if I remind it of the historic basis for the distinction between earned and investment income. The Minister of State is smiling. No doubt he has received the usual meticulous brief from Somerset House. But I would remind the Committee that initially there was no distinction of earned income relief, which was introduced some time before the First World War as a recognition of the deterioration of hand, eye and brain. It was a capital allowance for human capacity, as it were, and a recognition of the impermanence of employment.
But the converse is frankly not true. It was never designed as a penalty for thrift

or enterprise as it has now become under the singularly maladroit stewardship of the present Chancellor of the Exchequer.
In case hon. Members think that capital does not bear any fiscal burden, I would remind the Committee that capital bears stamp duty at 2 per cent. and stamp duty was originally introduced as a kind of capital levy. There is capital gains tax, which is now no more than a capital levy, bearing in mind the ravages of inflation. Finally, we have capital transfer tax at rates that are quite unimaginable in our competing countries of the Common Market.
8.15 p.m. 
There has been a great deal of distasteful talk about an investment strike by means of owners of capital. For myself, I find this a rather distasteful metaphor. When one considers the commercial hazards to which investment is subjected and the hazards of the Socialist Government, which make it subject to capital gains tax at rates between 95 per cent. and 98 per cent., can we wonder why there is a certain reticence in this country on the part of the investor?
The amendment goes a very small way to remedying this injustice. I hope that the Minister of State will turn his back on his absent colleagues below the Gangway and rise to the challenge. I am sure that the understanding and sympathy, which I know have made him a byword in Somerset House, will induce him on this occasion to accept what is perhaps an over-modest amendment.

Mr. Pardoe: I find myself very much in agreement with many of the remarks that have been made in this debate. I found the arguments used by the hon. Member for Horsham and Crawley (Mr. Hordern) familiar, because they are arguments that I have used on more than one occasion and shall do so again.
The hon. Gentleman quoted some remarks about the beneficial effect of the Liberals holding the balance of power in 1974, when we were able to raise the investment income surcharge threshold quite considerably. I would say that some of the effects of the Liberals holding the balance of power are already apparent in this Finance Bill debate, although the hon. Gentleman's right hon. and hon. Friends will not have it that


way. We may not be successful on investment income surcharge, but we have petrol and tomorrow we shall be debating VAT, and there are certain concessions on that.

Mr. Peter Rees: Mr. Peter Rees rose—

Mr. Pardoe: I shall answer the hon. and learned Gentleman without his intervening. The fact is that the Government have tabled an amendment and he will have seen that already. He knows that the Government propose to raise the VAT threshold to £7,500, not as much as he or I would wish, but nevertheless a step in the right direction, as I am sure the hon. and learned Gentleman will admit. Petrol and VAT are two subjects on which we have been successful, and one has to have moderation in all things.

Mr. Hordern: This argument cannot be skated over like that. What the hon. Gentleman said was:
We managed to defeat the Treasury Bench and to increase the threshold for investment income to £2,000. It is a pity we cannot do that again tonight."—[Official Report, 11th May 1977; Vol. 911, c. 383.]
He was recalling the circumstances of what happened in 1974.
But it is not just a question of what the hon. Gentleman said. It is a question of what he actually did. He and his colleagues joined us in increasing the investment income surcharge threshold in that particular year. If he does not vote with us tonight, he will be inconsistent not only with his words but with his actions.

Mr. Pardoe: On that occasion it was not a question of my joining the Conservatives. In fact, it was the Conservatives who voted for my amendment. Let us get it the right way round.
I am not trying to shirk the responsibility for that glorious deed. What I am saying is that the hon. Gentleman may not have noticed that the Government have accepted the argument for increasing the investment income surcharge threshold, because in this Finance Bill the threshold is in fact increased. It is increased by 50 per cent., from £1,000 to £1,500 and for elderly people over 65 it has been raised to the level for which I asked in 1974, £2,000. £2,000 is not worth what it was in 1974—

Mr. Hordern: That is too much! What happened was that we voted to put up the threshold to £2,000, but at the end of October the Government came back with an increased majority and put it down. What they are now doing is to restore it to the position for which we voted in March 1974. But, because of the lapse of time, the correct figure should be £4,000. If the hon. Gentleman voted for it then, he must vote for it tonight.

Mr. Pardoe: That would mean that the Conservative Party had to join me in accepting the principle of indexation of the tax system. It is not prepared to do that, because the right hon. and learned Member for Surrey, East (Sir G. Howe) knows perfectly well that if by any incredible mischance of fate he should actually end up on the Government Benches, he would not want to be bound by indexation and by a commitment to raising tax thresholds in line with the cost of living, as the hon. Member for Horsham and Crawley is now arguing. That is a principle that I accept and that I have argued in this House for many years. I accept that principle, but I have not yet been able to persuade the Conservative Party to do the same. I hope that the hon. Member for Blaby (Mr. Lawson) will have more success in that direction.
The speeches we have heard from the Conservatives in this debate seem to have ignored entirely the fact that the Government have restored the position for which we argued in 1974. That is not enough. It is certainly not as much as I want, and it certainly does not coincide with the rise in the cost of living and the fall in the value of money. Nevertheless, it is a step in the right direction.
I am far more concerned to persuade the Government in the long term to reform our tax system than to make minor changes in taxation rates. In any case, as I have said, the Government have already made some minor changes in that direction.
I come now to the comments of the hon. and learned Member for Dover and Deal (Mr. Rees). He raised the fundamental question of whether we should be distinguishing between different types of income. There is a great deal to be said for that line of argument. I was


interested in his history of the investment income surcharge, but I was not entirely sure that that was the main line of argument used when the surcharge was introduced. After all, we are not the only country to discriminate against income from investment.

Sir John Hall: We are almost the only one.

Mr. Pardoe: By no means are we almost the only country to do that. When we introduced our system, we did so on the basis that the investment income conferred on the beneficiary some advantage over and above the advantage conferred upon him by income from work. The argument goes—and I do not necessarily accept it, because circumstances have changed since then, which is why I accept to a large extent the argument that the hon. and learned Gentleman was making—that in distinguishing between these two sorts of income an investment income confers a benefit because it is more permanent than income from work. A job could cease, or a man could become sick, or his working life could end. Income from investment would continue through all those circumstances.

Mr. Peter Rees: I think that the hon. Member for Cornwall, North (Mr. Pardoe) is starting from the wrong premise. It was argued not that investment income was more permanent, but that employment income was more precarious. There is a fundamental divide there. The hon. Member ought to recognise that fact in developing his interesting argument.

Mr. Pardoe: I believe that the hon. and learned Gentleman is splitting hairs, but we are basically on the same wavelength. If income from investment is more certain, it follows that income from work is more precarious.
At the time that the system was introduced, this country moved in the direction of a surcharge on investment income. Other European countries moved towards taxing the wealth direct. Whatever we may think now, and whether or not it would be possible to change, and how long that would take, I have no doubt that the arguments in favour of taxing the wealth from which the income derives rather than the income itself have enormous advantages. Those countries made

the right decision and we made the wrong one.
In a previous debate, the hon. Member for Eastbourne (Mr. Gow) challenged me on the question of the wealth tax and said that he would be surprised if I were able to persuade the Government on this point. I have before me Volume I of the proceedings of the Select Committee on the Wealth Tax. It is true that the name of the hon. Member for Eastbourne is not shown as voting for a low threshold and heavy wealth tax. But the names of those voting in favour of that include
'Mr. Peter Rees, Mr. Paul Hawkins, Mr. Nigel Lawson"—

The First Deputy Chairman: Order. The hon. Gentleman must refer to hon. Members by their constituencies.

Mr. Pardoe: I apologise, Sir Myer, but I was quoting from a report to the House of Commons, and I should have thought that I could quote names, although I stand corrected if I am wrong.

The First Deputy Chairman: On reflection, I am sure, the hon. Member will appreciate that we ought to refer to constituencies. If the hon. Member has a list of names before him, it may present problems, although if he wishes to discover the constituencies of the Members concerned, I am sure that the Committee will bear with him.

Mr. Pardoe: I think that I can get most of them, Sir Myer. The names include the right hon. Member for Farnham (Mr. Macmillan), the hon. and learned Member for Dover and Deal, and the hon. Members for Blaby and Hove (Mr. Sainsbury). There are also the names of various others who voted in favour of my proposals.

Mr. Peter Rees: I apologise for interrupting the hon. Gentleman a second time, but the hon. Gentleman should remind the Committee of the considered view of my hon. Friends and myself in that Select Committee. There were certain tactical dilemmas about how we should vote. But I think that our considered views are embodied in the majority report. I happened to be one of the majority. It was only because the hon. Gentleman's particular views were put to us first that we voted for them. We did so on the basis that if a tax were to be introduced on the basis suggested by the


hon. Gentleman, it should be matched by reductions in other direct taxation, which would have been unimaginable under the present Chancellor.

Mr. Pardoe: The hon. and learned Gentleman's memory of those proceedings is extraordinarily defective. The whole point about that Committee was that there was no majority report. He and his colleagues had no majority. The chairman did not command a majority, and nor did my colleagues. There was no majority, but my proposal won as many votes as did the proposal of the hon. and learned Gentleman. I think, therefore, that I can claim that I had the support of the majority of the Conservative Members of the Committee for a low threshold wealth tax instead of a surcharge on investment income. That is the only point I am making.
I believe that that is a sensible course to adopt, because to tax income from wealth means inevitably that we encourage people to use their wealth unproductively. If we tax the wealth rather than the income, we encourage people to use their wealth productively instead of spending it on such items as a Rolls-Royce, or even a picture. I am not saying that we should stop people owning such items. A person is encouraged to spend £20,000 or £30,000 on a Rolls-Royce because the benefit from that car is greater than the benefit that remains after he has paid the 98 per cent. rate of tax.
That is how investment income surcharge distorts saving. It has been argued from the Conservative Benches that it is quite wrong, for instance, that some of these large public service index-linked pensions are counted as earned income and are not subject to the investment income surcharge, whereas income from quite small sums of investment are so regarded. That kind of distinction is entirely wrong. A tax on wealth would be right provided we counted the wealth factor in the pension—calculated according to any actuarial principles—as wealth for taxation purposes. It would be far better to scrap investment income surcharge completely and to replace it with a tax on wealth. I hope that we shall move in that direction during the next year or two.
Meanwhile, I welcome any increase in that direction, and I therefore welcome the increase that is taking place here. It

is a modest advance, but on this occasion it would not be right for the House substantially to increase the net take-home pay of people in this category at a time when we are doing everything that we can to keep total incomes down over the next year.

8.30 p.m.

Sir G. Howe: The hon. Member for Cornwall, North (Mr. Pardoe) has just given us an interesting insight into the process of self-torture that his party is inflicting on itself by its present parliamentary posture. We must look at the record aright. Two or three years ago, when the Liberal Party was in its halcyon days and held the balance of power in the House, the Liberals were proud to vote in our support, to precisely this effect.

Mr. Pardoe: It was a vote for me.

Sir G. Howe: I care not. I do not wish to have too much insight into the Liberal Party's anguish.
The parties joined together to vote for an amendment on investment income surcharge. My hon. Friend the Member for Horsham and Crawley (Mr. Hordern) referred to a speech in which the hon. Member for Cornwall, North announced his intention of doing such a thing again if the opportunity re-presented itself. To night the Liberal Party has within its grasp a chance of restoring the limit to £4,000. That is what the Liberal Party strove for, voluntarily, two or three years ago, yet it will not vote for the same proposal tonight.
The hon. Member for Cornwall, North has treated the House to an elaborate excursion into wealth and the investment income surcharge, but he is no longer in a position to stand up for the cause that he voted for then and that he presented to his electors because he is chained by the Lib-Lab pact. That has prevented him from achieving that which his electors and our electors want. United the Liberals and the Government totter, and united they will fall.

Mr. Pardoe: It is not a matter of my being chained at all but that I prefer, this time round, to reduce other taxes. That is the only choice that I have to make. The right hon. and learned Member for Surrey, East (Sir G. Howe) is free and irresponsible enough to want to lower every tax and we shall tot up


the total number of taxes that he has advocated lowering during these debates.

Sir Geoffrey Howe: That argument by the Liberal Party is more bizarre than most of its others. The arguments are common ground on this side of the Committee, and we could carry them in the Division. Dividend restraint and investment income surcharge are repelling and destroying private investors' motivation. Investment income surcharge, as my hon. Friend the Member for Wycombe (Sir J. Hall) stated, is imposing an injustice upon pensioners. It is particularly unjust because 43 per cent. of the yield of that tax, as my hon. Friend the Member for Horsham and Crawley said, comes from pensioners.
I can join with the hon. Member for Cornwall, North, and my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) in saying that the whole principle of investment income surcharge is increasingly questionable. The distinction was originally invented by the Liberal Party in about 1907, before Lloyd George moved into No. 11. It was probably invented by McKenna.

Mr. Pardoe: A great mistake.

Sir G. Howe: Probably, but the Liberal Party during its time of activity made many mistakes, and it still does.
A distinction was made between the security and permanence of investment income and the insecurity and precariousness of income from employment. However, if one looks at what has happened to investment income during the last 15 years, because of inflation and the tax burden that has drawn it downward, the situation has become increasingly bizarre. Investment income surcharge was introduced when income tax was at a rate of 10 per cent. and when there was no capital transfer tax or capital gains tax. The principle should be re-examined in order to discover whether it should survive any longer.
That is why I invite my colleagues to support the amendment. We are confronted with a curious Government. Ministers repeatedly say that they want more employment and yet they clobber the employer; they say that they want more investment and yet they clobber the investors; they talk about an investment

strike and cause an investment lockout.

Mr. Denzil Davies: The hon. Member for Horsham and Crawley (Mr. Hordern) ranged fairly widely and covered the problems of dividend control, bemoaned the demise of the small investor and the increasing power of the institutions, and claimed that the Government were against savings. I suggest that perhaps the major reason that private investors are not very strong compared with institutional investors is the enormous tax benefit that Governments of both parties have given to institutional saving. It is largely because of these benefits that institutional investors have become so powerful.
In many other countries benefits for institutional savings are not so great and the tax reliefs are not so large. Consequently, the institutional investor is not so powerful. The situation is not quite as simplistic as the hon. Gentleman makes out.

Mr. Hordern: I am always grateful to receive advice from the Minister on these matters. Most institutions are concerned with regular savings in the form of pension contributions. These contributions are not voluntary. It is not that employees want to pay them: they are bound to do so. Institutional investment has grown because many pension funds have had to top up their savings because of inflation, and they are finding it increasingly difficult.

Mr. Davies: The hon. Gentleman has not met my point—that because of the enormous tax benefits for contractual savings, institutions have grown increasingly powerful. This is part of their empire and they have an enormous vested interest in keeping it that way. In many other countries contractual savings are a lower proportion of total savings.
We have been told how the distinction between earned and unearned income was put into our law. I am not sure what the philosophical reasons were, but until 1972 or 1973 there was a distinction between earned and unearned income and no threshold on which the surcharge operated.
Governments of both parties—including Conservative Governments for a long time—have accepted that unearned income should be taxed more heavily than


earned income and there was not even a threshold of relief. In 1973 the Conservatives finally plucked up courage and managed to slip through with their unification of surtax and basic rate tax and an exemption of £2,000. They did not have the political courage to do it before then, but Lord Barber saw the opportunity to slip it through without anyone noticing. In the Budget we are increasing the threshold to £1,500 for persons under 65 and £2,000 for those over 65.
I accept what the hon. Member for Wycombe (Sir J. Hall) said about the anomaly of pensions from institutional savings being regarded as earned income with no investment income surcharge being levied on them while a person who saves for his old age in some other way finds his income being treated as unearned. However, the amendment is not concerned with income from savings. It is concerned with investment income, whether derived from savings or from money accruing in any other way. It does not seek to isolate income from savings. I accept that there is an anomaly and it is partly to cover that that we have the exemption from surcharge for a certain proportion of investment income.

Sir John Hall: I stress again that although the Government have now increased the amount from £1,500 to £2,000, it is still in real terms half of the value when it was first granted.

Mr. Davies: I am coming to that. It has only taken it back to half of what it was. We do not entirely accept that the original levels were correct or right. But, leaving that aside, Conservative Members are seeking in the amendment the full indexation of the investment income surcharge threshold or relief. They sought in their last amendment to index the higher rate relief, but they have not got any further with their indexation. Unless they have changed it in the last day or so, the indexation of tax reliefs is not their general policy.
They have tabled no amendment to index personal allowances. They say that they want indexation for higher rate relief and to get the full benefit, or not to be subjected to the full rigours of inflation. They say that they want investment income surcharge to be fully indexed, but that is as far as they want to go. That is unfair. If they believe that

indexation is right, they should say that they want it throughout the tax system instead of wishing to give the benefit to people who are better off.
This attitude betrays some of the anomaly in the Conservatives' argument. They want indexation only where it benefits most the people who tend to support them most. That is not the kind of approach that the Government believe to be right in the present circumstances.
The hon. Member for Cornwall, North (Mr. Pardoe) made the fair point that if we had a wealth tax, no doubt we would look again at the desirability of having an investment income surcharge. There were many arguments about this in the Select Committee and I was interested to note that so many Conservative Members are in favour of a heavy wealth tax. The hon. and learned Member for Dover and Deal (Mr. Rees), for instance, is in favour of this impost.

Mr. Peter Rees: Let me nail that canard at once. I have never put my name to any report whatever suggesting that there should be a heavy wealth tax.

Mr. Davies: I accept that. I shall read again the minutes of the Select Committee proceedings and see what exactly was said.

Mr. Pardoe: The proposal was for a wealth tax with a threshold of £30,000. That is a very low threshold by comparison with the Government's £100,000, although not low by European standards. It was for a progressive wealth tax rising to 2½ per cent. on incomes over £500,000. A tax of 2½ per cent. is a heavy wealth tax.

Mr. Davies: I am grateful to the hon. Gentleman. If we had a heavy wealth tax of that kind, the case would be even greater for considering whether it would be fair and equitable to have an investment income surcharge as well. That is a matter for the future. It was discussed by the Committee, and will no doubt be discussed here again and again in the future.
We accept the need for a threshold and that many persons who pay the investment income surcharge are not very well off. Others are. We think it is fair in present circumstances to raise the threshold to £1,500 and £2,000 respectively for people under and over 65. We do not believe that the indexation which the


Conservatives desire is fair and right in relation to other taxpayers. I ask the Committee for that reason to reject the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 194, Noes 237.

Division No. 130]
AYES
[8.44 p.m.


Adley, Robert
Hall, Sir John
Newton, Tony


Alison, Michael
Hamilton, Michael (Salisbury)
Onslow, Cranley


Amery, Rt Hon Julian
Hampson, Dr Keith
Oppenheim, Mrs Sally


Arnold, Tom
Hannam, John
Page, John (Harrow West)


Atkins, Rt Hon H. (Spelthorne)
Harrison, Col Sir Harwood (Eye)
Page, Rt Hon R. Graham (Crosby)


Awdry, Daniel
Harvie Anderson, Rt Hon Miss
Page, Richard (Workington)


Baker, Kenneth
Havers, Sir Michael
Parkinson, Cecil


Bell, Ronald
Hayhoe, Barney
Pattie, Geoffrey


Benyon, W.
Higgins, Terence L.
Percival, Ian


Berry, Hon Anthony
Hodgson, Robin
Peyton, Rt Hon John


Biffen, John
Holland, Philip
Powell, Rt Hon J. Enoch


Biggs-Davison, John
Hordern, Peter
Price, David (Eastleigh)


Blaker, Peter
Howe, Rt Hon Sir Geoffrey
Prior, Rt Hon James


Bottomley, Peter
Howell, David (Guildford)
Pym, Rt Hon Francis


Bowden, A. (Brighton, Kemptown)
Hunt, John (Bromley)
Rathbone, Tim


Boyson, Dr Rhodes (Brent)
Hurd, Douglas
Rawlinson, Rt Hon Sir Peter


Braine, Sir Bernard
Hutchison, Michael Clark
Rees, Peter (Dover &amp; Deal)


Brittan, Leon
James, David
Rees-Davies, W. R.


Brocklebank-Fowler, C.
Jenkin, Rt Hon P. (Wanst'd &amp; W'dt'd)
Renton, Rt Hon Sir D. (Hunts)


Brooke, Peter
Johnson Smith, G. (E Grinstead)
Renton, Tim (Mid-Sussex)


Brotherton, Michael
Jones, Arthur (Daventry)
Rhodes James, R.


Brown, Sir Edward (Bath)
Jopling, Michael
Ridley, Hon Nicholas


Bryan, Sir Paul
Kaberry, Sir Donald
Rifkind, Malcolm


Buchanan-Smith, Alick
King, Evelyn (South Dorset)
Roberts, Michael (Cardiff NW)


Budgen, Nick
King, Tom (Bridgwater)
Roberts, Wyn (Conway)


Bulmer, Esmond
Knight, Mrs Jill
Rossi, Hugh (Hornsey)


Burden, F. A.
Knox, David
Rost, Peter (SE Derbyshire)


Canlisle, Mark
Latham, Michael (Melton)
St. John-Stevas, Norman


Chalker, Mrs Lynda
Lawrence, Ivan
Scott, Nicholas


Churchill, W. S.
Lawson, Nigel
Shaw, Giles (Pudsey)


Clark, Alan (Plymouth, Sutton)
Le Marchant, Spencer
Shelton, William (Streatham)


Clark, William (Croydon S)
Lewis, Kenneth (Rutland)
Shepherd, Colin


Clarke, Kenneth (Rushcliffe)
Lloyd, Ian
Shersby, Michael


Clegg, Walter
Loveridge, John
Silvester, Fred


Cockcroft, John
McAdden, Sir Stephen
Sims, Roger


Cope, John
McCrindle, Robert
Sinclair, Sir George


Cormack, Patrick
Macfarlane, Nell
Skeet, T.H.H.


Costain, A. P.
MacGregor, John
Smith, Timothy John (Ashfield)


Dodsworth, Geoffrey
Mackay, Andrew James
Speed, Keith


Douglas-Hamilton, Lord James
Macmillan, Rt Hon M. (Farnham)
Spence, John


Drayson, Burnaby
McNair-Wilson, M. (Newbury)
Spicer, Michael (S Worcester)


Durant, Tony
McNair-Wilson, P. (New Forest)
Sproat, lain


Eden, Rt Hon Sir John
Madel, David
Stainton, Keith


Edwards, Nicholas (Pembroke)
Marshall, Michael (Arundel)
Stanbrook, Ivor


Elliott, Sir William
Mates, Michael
Steen, Anthony (Wavertree)


Emery, Peter
Mather, Carol
Stewart, Ian (Hitchin)


Eyre, Reginald
Maude, Angus
Stokes, John


Fairbairn, Nicholas
Mawby, Ray
Stradling Thomas, J.


Falrgrieve, Russell
Mayhew, Patrick
Tapsell, Peter


Fisher, Sir Nigel
Meyer, Sir Anthony
Taylor, Teddy (Cathcart)


Fletcher, Alex (Edinburgh N)
Miller, Hal (Bromsgrove)
Tebbit, Norman


Forman, Nigel
Mills, Peter
Temple-Morris, Peter


Fox, Marcus
Miscampbell, Norman
Thomas, Rt Hon P. (Hendon S)


Gardiner, George (Reigate)
Moate, Roger
Townsend, Cyril D.


Gardner, Edward (S Fylde)
Molyneaux, James
Viggers, Peter


Gilmour, Sir John (East Fife)
Monro, Hector
Wakeham, John


Glyn, Dr Alan
Montgomery, Fergus
Walder, David (Clitheroe)


Godber, Rt Hon Joseph
Moore, John (Croydon C)
Walker, Rt Hon P. (Worcester)


Goodlad, Alastair
Morgan, Geraint
Weatherill, Bernard


Gorst, John
Morgan-Giles, Rear-Admiral
Wells, John


Gow, Ian (Eastbourne)
Morris, Michael (Northampton S)
Winterton, Nicholas


Gower, Sir Raymond (Barry)
Morrison, Charles (Devizes)
Younger, Hon George


Gray, Hamish
Morrison, Hon Peter (Chester)



Griffiths, Eldon
Mudd, David
TELLERS FOR THE AYES:


Grist, Ian
Neave, Airey
Sir George Young and


Grylls, Michael
Nelson, Anthony 
Mr. Jim Lester.




NOES


Abse, Leo
Atkins, Ronald (Preston N)
Bidwell, Sydney


Allaun, Frank
Atkinson, Norman
Bishop, E. S.


Archer, Peter
Bates, Alf
Blenkinsop, Arthur


Armstrong, Ernest
Bean, R. E.
Boardman, H.


Ashley, Jack
Beith, A. J.
Booth, Rt Hon Albert


Ashton, Joe
Bennett, Andrew (Stockport N)
Boothroyd, Miss Betty




Brown, Hugh D. (Provan)
Horam, John
Pavitt, Laurie


Buchan, Norman
Howell, Rt Hon Denis (B'ham, Sm H)
Pendry, Tom


Buchanan, Richard
Howells, Geraint (Cardigan)
Penhaligon, Daid


Callaghan, Jim (Middleton &amp; P)
Hoyle, Doug (Nelson)
Price, William (Rugby)


Campbell, Ian
Hughes, Robert (Aberdeen N)
Radice, Giles


Canavan, Dennis
Hughes, Roy (Newport)
Rees, Rt Hon Merlyn (Leeds S)


Cant, R. B.
Hunter, Adam
Richardson, Miss Jo


Carmlehael, Neil
Irvine, Rt Hon Sir A. (Edge Hill)
Roberts, Albert (Normanton)


Carter-Jones, Lewis
Irving, Rt Hon S. (Dartford)
Roberts, Gwilym (Cannock)


Cartwright, John
Jackson, Colin (Brighouse)
Robinson, Geoffrey


Castle, Rt Hon Barbara
Jackson, Miss Margaret (Lincoln)
Roderick, Caerwyn


Clemitson, Ivor
Jeger, Mrs Lena
Rodgers, George (Chorley)


Cocks, Rt Hon Michael
Jenkins, Hugh (Putney)
Rooker, J. W.


Cohen, Stanley
John, Brynmor
Rose, Paul B.


Coleman, Donald
Johnson, James (Hull West)
Ross, Stephen (Isle of Wight)


Colquhoun, Us Maureen
Johnson, Walter (Derby S)
Ross, Rt Hon W. (Kilmarnock)


Conlan, Bernard
Jones, Alec (Rhondda)
Rowlands, Ted


Cook, Robin F. (Edin C)
Jones, Barry (East Flint)
Ryman, John


Corbett, Robin
Kaufman, Gerald
Sedgemore, Brian


Cowans, Harry
Kelley, Richard
Selby, Harry


Cox, Thomas (Tooting)
Kerr, Russell
Sheldon, Rt Hon Robert


Crawlord, Douglas
Kilroy-Silk, Robert
Shore, Rt Hon Peter


Crawshaw, Richard
Kinnock, Neil
Short, Mrs Renée (Wolv NE)


Crowther, Stan (Rotherham)
Lamble, David
Silkin, Rt Hon John (Deptford)


Cryer, Bob
Lamborn, Harry
Silkin, Rt Hon S. C. (Dulwich)


Cunningham, G. (Islington S)
Lamond, James
Silverman, Julius


Davidson, Arthur
Latham, Arthur (Paddington)
Skinner, Dennis


Davies, Bryan (Enfield N)
Lee, John
Small, William


Davies, Denzil (Llanelli)
Lestor, Miss Joan (Eton and Slough)
Smith, Cyril (Rochdale)


Davis, Clinton (Hackney C)
Lever, Rt Hon Harold
Smith, John (N Lanarkshire)


Deakins, Eric
Lewis, Ror Carlisle)
Snape, Peter


Dean, Joseph (Leeds West)
Loyden, Eddie
Spearing, Nigel


Dell, Rt Hon Edmund
Luard, Evan
Spriggs, Leslie


Dempsey, James
Lyons, Edward (Bradford W)
Stallard, A. W.


Doig, Peter
Mabon, Rt Hon Dr J. Dickson
Stewart, Rt Hon Donald


Douglas-Mann, Bruce
McCartney, Hugh
Stewart, Rt Hon M. (Fulham)


Dunn, James A.
McDonald, Dr Oonagh
Stoddart, David


Dunnett, Jack
McElhone, Frank
Stott, Roger


Eadie, Alex
MacFarquhar, Roderick
Strang, Gavin


Edge, Geoff
MacKenzie, Gregor
Taylor, Mrs Ann (Bolton W)


Ellis, John (Brigg &amp; Scun)
Mnckintosh John P.
Thomas, Dafydd (Merconeth)


Ennals, David
McMillan, Tom (Glasgow C)
Thomas, Jeffrey (Abertillery)


Evans, Fred (Caerphilly)
McNamara, Kevin
Thomas, Mike (Newcastle E)


Evans, Gwynfor (Carmarthen)
Madden, Max
Thomas, Ron (Bristol NW)


Evans, Ioan (Aberdare)
Mahon, Simon
Thompson, George


Ewing, Harry (Stirling)
Mallalieu, J. P. W.
Thorne, Stan (Preston South)


Ewing, Mrs Winiftred (Moray)
Marks, Kenneth
Tierney, Sydney


Faulds, Andrew
Marshall, Jim (Leicester S)
Torney, Tom


Flannery, Martin
Maynard, Miss Joan
Tuck, Raphael


Fletcher, Ted (Darlington)
Meacher, Michael
Varley, Rt Hon Eric G.


Foot, Rt Hon Michael
Mendelson, John
Wainwright, Edwin (Dearne V)


Ford, Ben
Mikardo, Ian
Walker, Terry (Kingswood)


Fowler, Gerald (The Wrekin)
Millan, Rt Hon Bruce
Ward, Michael


Fraser, John (Lambeth, N'w'd)
Miller, Dr M. S. (E Kilbride)
Watkins, David


Freeson, Reginald
Miller, Mrs Millie (Ilford N)
Welsh, Andrew


Garrett, John (Norwich S)
Mitchell, Austin Vernon (Grimsby)
White, James (Pollok)


George, Bruce
Molloy, William
Whitlock, William


Gilbert, Dr John
Moonman, Eric
Wigley, Dafydd


Golding, John
Morris, Alfred (Wythenshawe)
Willey, Rt Hon Frederick


Gould, Bryan
Morris, Charles R. (Openshaw)
Williams, Rt Hon Alan (Swansea W)


Gourlay, Harry
Morris, Rt Hon J. (Aberavon)
Williams, Sir Thomas (Warrington)


Graham, Ted
Moyle, Roland
Wilson, Alexander (Hamilton)


Grant, George (Morpeth)
Murray, Rt Hon Ronald King
Wilson, Gordon (Dundee E)


Grant, John (Islington C)
Newens, Stanley
Wilson, Rt Hon Sir Harold (Huyton)


Grocott, Bruce
Noble, Mike
Wilson, William (Coventry SE)


Hamilton, James (Bothwell)
Oakes, Gordon
Wise, Mrs Audrey


Harper, Joseph
Ogden, Eric
Woodall, Alec


Harrison, Walter (Wakefield)
O'Halloran, Michael
Woof, Robert


Hart, Rt Hon Judith
Orme, Rt Hon Stanley
Wrigglesworth, Ian


Hatton, Frank
Ovenden, John
Young, David (Bolton E)


Hayman, Mrs Helene
Padley, Walter



Heffer, Eric S.
Palmer, Arthur
TELLERS FOR THE NOES:


Henderson, Douglas
Pardoe, John
Mr. Frank R. White and


Hooley, Frank
Park, George
Mr. James Tinn.


Hooson, Emlyn

Question accordingly negatived.

Mrs. Wise: I beg to move amendment No. 20, in page 11, line 20, at end insert
'provided that any income derived from moneys awarded as compensation damages

and insurance in respect of industrial or personal accident or injury shall be treated as earned income and not as investment income'.
I shall be brief, because this proposal should not be controversial.
It is clear that when a person is awarded a sizeable lump sum for an


injury it is in nature different from a source of investment made by someone who has been able to save out of a large surplus income. It is different both in origin and in nature. I therefore ask my right hon. Friend the Financial Secretary to ensure that it is treated differently for tax purposes.
The proposal to treat such money as earned income rather than investment income so that it avoids the investment surcharge is equitable and should meet with a good deal of approval. A person who has had a bad injury, perhaps at work, and who in the normal course of events would not have a large lump sum available for investment may suddenly find that the income from his compensation award attracts the higher rates of tax applicable to someone living on unearned income.
I believe that the Financial Secretary may be sympathetic to the objective of the amendment. If so, I should appreciate it if he would try to meet us on this matter. At first glance it may seem difficult to distinguish between one kind of investment income and another. However, I suggest that account is already kept of what happens to investment income. For example, if investments are bought and sold, a record must be kept in order that capital gains tax may be recouped. My hon. Friends and I have taken some accountancy advice. We believe that it is possible to find a way to keep track of the income which derives from a compensation or other lump sum award.
If my right hon. Friend will meet us on this matter, we shall be pleased to seek to withdraw the amendment. He may wish to take it away and bring forward some other wording or to suggest another mechanism. However, if he feels unable to meet us we shall he compelled to push the amendment to a vote. It is an important point of principle. The effect of carrying the amendment would be to help a number of people who are already suffering misfortune because of serious accident or injury.

9.0 p.m.

Mr. Robert Kilroy-Silk: I support my hon. Friend the Member for Coventry, South-West (Mrs. Wise) and I

urge the Financial Secretary to give serious and sympathetic consideration to what she has said. She is talking about a group of people in different categories who already, through no fault of their own, suffer injury and distress. They are being penalised by a taxation system which most hon. Members regard as inequitable.
Their income is being taxed as investment income and it is subject to investment surcharge. Such income attracts higher rates of tax than are either proper or appropriate. There is no reason why they should not receive, and there is every reason why they should be able to receive, the maximum earned income tax allowances.
I hope that my right hon. Friend will reply in the spirit in which the amendment was moved. I hope that he will be able to give more positive guarantees than this Government and previous Governments have given so far. I hope that it will not be necessary for hon. Members who support the amendment to push it to a vote.

The Financial Secretary to the Treasury (Mr. Robert Sheldon): The amendment seeks to exempt from investment income surcharge any income that arises from an investment of moneys which have been awarded as compensation for industrial or personal accident. My hon. Friend the Member for Coventry, South-West (Mrs. Wise) asked whether I was sympathetic to the amendment's objective. She does not need me to repeat that many people who are disabled—frequently for life, sometimes completely and sometimes partially—have a serious problem in adjusting to their future if compensation is their only form of income, apart from that which the State is able to provide.
I am sympathetic to the objective of the amendment, but there are a number of problems which remain difficult. My hon. Friend mentioned the possibility of obtaining outside advice. I believe that she has some matters on which she can inform the House. Perhaps we can hear about them at another stage. I must remind her of some of the problems of which I know she is aware. I shall examine them fairly briefly and explain them to those who are not as conversant as my hon. Friend with the subject.
The difficulty involves identifying the income arising from these awards. My hon. Friend mentioned the possibility of keeping track of capital. In that she is wholly right. Of course one can keep track of capital, even when it changes. If one changes the purpose of one's capital—whether to buy a picture, possibly, or a house, or investments—one can keep track of the varying use to which that capital is put.
The problem about investments is that when the dividends arising from them are taxed it is not possible to know through the multiplicity of changes that can take place from exactly where they come.
I give one simple example. It may be that a person in the category in question has other income. It may be that his investments are very successful and that they become enlarged. It may be that they diminish. However, the one common feature about them is that they change.

Dr. McDonald: My reason for intervening now is, first, to correct a statement that my right hon. Friend made. We have already taken advice on this point and have discovered that there are at least two ways in which the problem that my hon. Friend the Member for Coventry, South-West (Mrs. Wise) has outlined can be overcome. One suggestion is that the investment income deriving from an award as a result of damages for industrial accident or injury could be held in a separate account. The other suggestion is that the income from the original investment could be treated as the first part of any further capital that the individual may have available for investment.
I do not say that either of those suggestions will prove the best possible solution to the problem. I give them as illustrations of the fact that the problem was not thought to be a very difficult problem to solve when we sought financial advice about it. I am sure that if my right hon. Friend and his officials in the Treasury gave their minds to it for a short period they could find an adequate solution to the problems that he is detailing.

Mr. Sheldon: I understand that point. I have thought about this aspect of the matter too. There is obviously the difficulty that if we were to lock such a person into a trust or some such arrangement, that might not necessarily be the

best use of the money. There are problems of that kind. However, if my hon. Friend has details of the plans that she has worked out, she knows that I would be more than delighted to look into those aspects and see how far they can improve upon the kinds of methods that I believed were generally available to deal with that aspect of the problem.

Sir G. Howe: My right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) and I, with some not very accurate recollection—perhaps the Minister will help us—believe that there has existed on the statute book a provision for giving special treatment to sums awarded by way of compensation, damages or otherwise, for personal injury. My own recollection is that there was a provision which exempted the income from such sums from aggregation with the income of parents when children's and parents' income was aggregated under a previous Labour Government. My right hon. Friend has the recollection that sums awarded by way of compensation for the effects of thalidomide were certainly exempted from aggregation under 1968 legislation. That is his recollection. My own thinking is that the provision had actually gone further, so as to exempt the income from taxation to some extent as well. However, it certainly looks as though this category of money has previously been defined and exempted on the statute book. Perhaps the Minister would care to look at those precedents.

Mr. Sheldon: That was not the case, for the simple reason that before the unified tax structure came into operation there was earned income and unearned income. That is the position right up to now. The income was not dependent upon the category of people concerned; rather was it dependent on the type of income. If the income was earned through employment, it was treated in one way; if it was unearned, it was treated in another way. That was the sole basis and it remains so today. In fact, it was taken as being the case when the matter of the thalidomide compensation arose. In that case there was a particular problem whereby these people were settling on one basis of tax treatment and then they found that it was not the basis that they had understood in the kind of settlement to which they agreed. Because of possible tax implications, the


Government at the time made a grant in order to overcome that problem. I speak from recollection, but I think that a grant of £5 million was made to avoid this kind of taxation problem.
My hon. Friends have taken some advice on this matter, and I would be very glad at any time to listen to that advice. The fact remains, however, that we have these two problems—the problem of separating earned income from investment income, and the point which I have made about the difficulty of being able to trace that income.
There is a third possible problem. I am not sure about it, for two reasons. I am not sure of the amount of weight that I can attach to it, and I have no close personal knowledge that I would like to have to use in an argument. The problem is that the courts themselves take taxation into account. Perhaps the changes being proposed in our taxation system would offset this difficulty, and I accept that this might be the case at this stage of consideration. Obviously, I am always happy to listen to further advice, and if my hon. Friends have any information for me perhaps we could take the matter up on that basis.

Mr. Patrick Jenkin: I hesitate to intervene, but we seem to be drawing on recollections of previous occasions. My recollection of the thalidomide grant is that when the Family Fund was set up it was done because of the taxation problem. This was a valuable initiative by the then Government. It was taken by my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), who made the point that the Government had a responsibility in this regard.
My right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) said earlier that when we considered in 1968 the last Labour Government's proposals for aggregating investment income for children we persuaded Ministers on the Treasury Bench to make an exception for income from compensation paid for personal injury to a child. That is not on all fours with the case that we are putting up now, but there is a case for the treatment of such income as earned rather than investment income. The Government should look at this. May be it

does not constitute a precedent, but there is a precedent for different treatment of such income.
This is a cause which must engage our sympathies. As long as one has broad sympathy for the general issue, it is hard to say that income from compensation paid for industrial injury, or for injury caused by the drug thalidomide, should be treated as investment income and be subject to the surcharge. There is a precedent for singling it out for special fiscal treatment.

Mr. Sheldon: I am not sure how much the right hon. Member for Wanstead and Woodford (Mr. Jenkin) has added to what I have already said. On the thalidomide case I was correct; the amount of the Government grant was £5 million, paid in 1974. The Government made a once and-for-all capital payment to the thalidomide children's trust which was specifically intended to increase the funds available to the trust to offset the effects of taxation. That is the problem. It is clear, however, that my hon. Friends have something new to add to the argument. I do not think that the comparison that the right hon. Member for Wanstead and Woodford drew quite meets the arguments of my hon. Friends.

9.15 p.m.

Mr. William Wilson: There might be difficulty in tracing income, where it comes from and where it goes to, when an individual has a multiplicity of sources of income and capital, but in my experience most of the people affected by the amendment will only ever receive one capital sum. Nothing could be easier than to set up a fund for that separate sum of money and for it to be earmarked.
I think my right hon. Friend is assuming that recipients of this sort of money possess a number of sources of wealth and that they are great wealthy people, but they are not. They have single items of capital paid to them, which remain with them, being dissipated as time goes by on ordinary expenses. From my personal experience, I can say that in most cases the problem would not be as great as the Minister is making out.

Mr. Ridley: I must confess that I agree with the Financial Secretary, that this is one of those rare occasions when I think


that he might be on the right lines. That is not to say that I do not have enormous sympathy with the hon. Member for Coventry, South-West (Mrs. Wise) and share her concern entirely about the plight of these people. I have her point of view about the desirability of achieving what she seeks, but I also share the Financial Secretary's doubts about the difficulties of achieving it in the way that she suggests.
Let us consider the possibility that a fund is set up, which I think would have to be in trust if there were not to be some form of evasion. If it were not in trust, other people could lend to the fund and derive their income from it free of investment income surcharge—as it were, on the back of the previous payment of an injury compensation benefit. I think that that is the answer to the hon. Member for Coventry, South-East (Mr. Wilson)—that, although the person who suffered the injury might initially be in possession of no other funds, it is surprising how clever tax avoiders and other financiers would find a way of using that fund to their own advantage. So some sort of trust would have to be set up.
Moreover, it is not true, as the hon. Member said, that this is likely to be the only asset of the recipient of the income. In many cases he might have a house or be able to arrange a mortgage and be able to put the extra funds into the trust and derive extra income from the trust, thereby evading the investment income surcharge through the means suggested in the amendment.
Thus, there would be possibilities for tax avoidance not only for the parasite but for the recipient himself. There would have to be strict rules governing these trusts if they were to be proof against the sort of abuses that I have tried to describe.

Mr. Kilroy-Silk: The hon. Member is very good at finding problems and potential abuses when we are talking about our people, about poor people—about people, as my hon. Friend the Member for Coventry, South-East (Mr. Wilson) said, who get small amounts of money once in a lifetime after an injury when they have been disabled. Yet when the hon. Gentleman several weeks ago was talking about the self-employed and their inability to obtain a tax exemption certificate, he

made light of the potential difficulties and abuses that we had pointed out and had no time for them. According to him, there were no problems and all the self-employed should have tax exemption certificates.
Is there not something of a double standard here? Is not the hon. Gentleman applying one set of standards to one category of people and a completely different set to those about whom we are talking, who are disadvantaged and unfortunate and at the lower end of the income scale?

Mr. Ridley: The hon. Gentleman is quite wrong. We shall be debating the tax exemption certificates on Thursday. If I have the good fortune to catch the eye of the Chair, I shall seek to say that the point of the regulations in respect of sub-contractors is not to avoid taxes but the fact that they take a view as to the suitability of the taxpayer. That is a new principle to which I strongly object.
The hon. Member for Ormskirk (Mr. Kilroy-Silk) has not heard me out. I am not out of sympathy with the aim of the amendment. I merely say that I do not think the hon. Lady is going about it in the right way. If she will hear me out, she will hear what I believe to be the right way to achieve her objective.
I cannot understand the proposition that recipients of industrial injury compensation are necessarily poor people. It may well be that the recipients of industrial injury compensation are from the middle income group or are very well off. There are many rich men who have been injured, as well as poor people.
It seems that there is an extraordinary series of demonologies in the mind of the hon. Member for Ormskirk. The hon. Gentleman seems to think that those who suffer industrial injury are by nature poor whereas all those who have investment income are by nature rich. That little thought might give the hon. Gentleman the clue to the answer that I shall give very shortly.
Before I seek to do that, let us pursue the thought of the trust. Let us suppose that there was a trust in which the sum of compensation was placed and that by good management by the trustees, or the injured person, there was investment in Poseidon. Let us suppose that the investor, or investors, got out at the right moment


and put the money into Slater Walker, getting out at the right moment and ending up with investment capital of £10 million, having started, shall we say, with £5,000. Is the hon. Lady saying that the whole of the investment income from that sum should be free of investment income surcharge, bearing in mind that 10 years later the original sum had grown to £10 million or whatever the figure might be?
With my sayings on the record, that is a proposition to which I might not object so strongly as the hon. Lady. In fact, the hon. Lady is encouraging everybody to be a capitalist and to speculate with his capital. She is seeking to give a tax advantage as well. It might happen that the person concerned was not a very clever speculator and invested the whole lot in British Government War Loan and found that the original value of the money had decreased by a half or a quarter in real terms. However, the hon. Lady is encouraging speculation by her amendment.
This is not the way to do it. I never like to leave a question without seeking to be constructive. I suggest that the hon. Lady has come upon the inequity of the investment income surcharge when applied to those with low incomes. I do not know whether she was present during the last debate when by hon. Friends tried to raise the threshold of the investment income surcharge. In any event, I am sure that she voted against them. In fact, she should have voted with my hon. Friends, as they were trying to do exactly what she is attempting, only for a wider category of people than she has selected.
Surely the whole Committee will agree that her selection—the recipients of industrial compensation due to injury—are particularly worthy subjects to have relief from investment income surcharge. No doubt we all agree about that. However, there are some who feel that there might be other categories in receipt of investment income who deserve equal treatment.
Rightly or wrongly—I know that this is arguable—my hon. Friends believe that the right way to approach this matter is not to seek to find the source of the investment income but to seek to find the total resources of the recipient and to say where the resources are not very great—for example, £4,000 has been mentioned,

but we could argue about that—and the investment income does not amount to a very great sum that it should be free from the surcharge. If she were able to accept that point of view, the hon. Lady would have been able to vote with us on the last amendment, thereby helping the people who are the subject of her own amendment, as well as a lot of other deserving cases.
The hon. Lady should put away her prejudices. She should put aside her belief that those suffering from industrial injuries are her own people, who vote for her and her party and therefore deserve special relief even from her prejudices. She should realise that the crucial point is the low level at which the investment income surcharge begins and change her views about the fundamental issue of taxation directed so much against investment income.

Mr. John Mendelson: I rise in case my right hon. Friend the Financial Secretary is tempted to abandon the useful attitude that he was approaching earlier because of the mischievous intervention of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). My right hon. Friend adopted that approach to the simple, straightforward and honest amendment, moved so well by my hon. Friend the Member for Coventry, South-West (Mrs. Wise). He gave it, at least in principle, sympathetic consideration. I hasten to point out how misguided is the propaganda of the hon. Member for Cirencester and Tewkesbury. I want my right hon. Friend to support my hon. Friend instead of trying to catch her on the propagandist wave of the hon. Member for Cirencester and Tewkesbury, thereby trying to lead her into all sorts of postures that she might not want to support.
The burden of the amendment is that the majority of people who suffer industrial injuries are wage earners and are therefore not rich people; nor are they in possession of other resources.

Mr. Ridley: The North Sea oil divers probably run the most dangerous risks of anyone, but, at least until recently, they have been self-employed. They have very high emoluments. Are they in the hon. Gentleman's category of rich people?

Mr. Mendelson: The hon. Gentleman understands figures and he knows that the number of cases of that kind are infinitesimal compared with the large number of people who suffer industrial injuries in ordinary occupations throughout the year. I do not want my right hon. Friend to be encouraged by the hon. Gentleman's intervention. I want him to stick to his original attitude in support of the amendment.
When a person who has worked in industry for wages suffers a serious industrial accident, the payment of compensation to him enables him to have an income to take the place of the wages he would have earned had the accident not occurred. That limits the argument, the reasoning behind it and the equity behind it. It should not be beyond the wit of man—including the excellent advisers of my right hon. Friend—to find a way of limitation that would be satisfactory to all concerned. The argument that it really represents another wage, although our insurance laws are not based on that principle, should commend itself to him. I hope that he will now give an assurance that he will get together with my hon. Friend and do his best to see how it can be done.

Mr. Robert Sheldon: I assure my hon. Friend the Member for Penistone (Mr. Mendelson) that when the argument of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) came to the problem of tax avoiders I did not even consider it, let alone let it weigh heavily with me. Although one can admire the hon. Gentleman's ingenuity, the practicality of his suggestions does not have much bearing on the important matter we are discussing. In my earlier speech I gave way to what I thought were interventions and, therefore, I did not finish what I wanted to say. Instead I found myself, in effect, originating a debate.
9.30 p.m. 
Perhaps I might end, as I had intended to do, by saying to my hon. Friend the Member for Coventry, South-West (Mrs. Wise) that I am delighted to accept the point she makes. She has given some good advice, and I am more than willing to listen to any advice from whatever quarter and to evaluate it. Bearing in mind the problems that I have mentioned, we can perhaps have some

further consultations following the debate. I therefore ask my hon. Friend to withdraw the amendment.

Mrs. Wise: I ought to deal with one or two of my hon. Friend's points. He mentioned the problem of altering the actions of judges with regard to the amount of compensation that they award. Once Parliament clearly indicated by passing this amendment that it wanted people who had suffered injury to benefit from this amendment, I would hope that judges would try to act in the light of that knowledge. It would be very unfortunate if they tried to thwart Parliament's intention and if they reduced compensation awards that is what they would be doing: they would be thwarting Parliament's intention of giving additional help to people in these circumstances. Although I have some scepticism about and natural suspicion of judges, I would rather give them the benefit of the doubt on this occasion and hope that they would take into account the clear intention of Parliament if an amendment like this were carried.
Another problem that my hon. Friend mentioned was that of distinguishing between any other earned income of the recipient and the investment income. I do not see that as a problem, because, if I understand my hon. Friend, the objective is to treat this kind of investment income as though it were earned income. It therefore does not seem to be a problem. The distinction between earned income and this kind of investment income cannot be insuperable since the objective is to treat them alike.
The only matter of substance with which we have to deal is the question of keeping track of the results of an award of compensation. If, for example, one of my hon. Friends were awarded £50,000, it should be possible for it to be deemed a special fund and be kept track of so that we could attach some sort of source to the income from that amount. Our tax system already copes with things that are more complicated. I am not surprised that we fail to collect corporation tax if we cannot deal with a relatively simple matter like this. If we cannot deal with that, I do not think that we can hope to deal with the complexity of taxing huge multinational companies.

Mr. William Wilson: I think the Minister has got the facts wrong about the


allowance that judges make in respect of tax. When computing the loss of wages they certainly take into account the amount of tax that would have been paid upon those wages.
But my hon. Friend should appreciate that the Front Bench cannot have it both ways. If the Front Bench is saying that it cannot allow this tax relief which the amendment is seeking to give because it is so difficult to compute what might happen to the money, and if all the wisdom of the Treasury cannot compute that, how can a judge compute it? My hon. Friend the Financial Secretary has got it wrong. The wages that are represented by the award are what is taken into account, not the taxation that might be payable in future in respect of the award.

Mrs. Wise: I am grateful to my hon. Friend the Member for Coventry, South-East (Mr. Wilson) for his intervention, and I take his point.
I think that we should ignore the wild imaginings of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who seems to think that every person who is disabled in an accident and receives compensation automatically becomes a speculator and a tax avoider and evader. I believe that when someone suffers a severe accident—and it must be severe if it is to involve the sums we are discussing—he has quite enough to do coping with the ordinary problems of life.

Mr. Ridley: Is the hon. Lady aware that the largest amounts of compensation are usually paid to film stars who, perhaps, suffer an injury to a leg, which inhibits their power to earn hundreds of thousands of pounds a year? Does she realise that those are the people who would benefit most from the amendment she is proposing?

Mrs. Wise: The hon. Gentleman is disgracing his colleagues. I thought that the interventions from the Opposition Front Bench were reasonable and helpful. It seemed to me that this was not a party matter but a subject on which we could combine to try to help people who are suddenly deprived, through an accident, of a limb or a faculty. It is disgraceful that the hon. Member should seek to turn people suffering in that way into

some sort of petty criminals. He might in those circumstances bend his mind in that direction, but I do not believe that most of the disabled people in the country would do that. His interventions are mischievous and irrelevant and they expose his outlook. I am sorry that his Front Bench—

Mr. Ridley: Will the hon. Lady give way?

Mrs. Wise: No. I appreciated the interventions from the Conservative Front Bench because I thought that they were genuinely attempts to find a way round any practical problems that might exist.
If my hon. Friend the Financial Secretary is saying that he would like to try to meet the point of the amendment and will try to bring forward a proposal, I am certainly willing to accept that undertaking and perhaps to have some further discussion about it. I hope that we shall find a way of ensuring that people who have suffered injury, whether an industrial injury or any other—and that includes the effects of being attacked by criminals—are helped under the Bill. In those circumstances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Tony Newton: I beg to move Amendment No. 22, in page 11, line 23, after 'more', insert:
or in the case of a widow or single woman that her age was sixty years or more '
If I speak briefly to it, that is only because I have moved similar amendments on previous Finance Bills, and I hope to have further opportunities of raising similar points in Standing Committee. If I am brief, it will not be because I believe in any way that the point covered by the amendment is not important. On the contrary, the treatment of single women and widows between the ages of 60 and 65 gives rise to some of the more glaring injustices of our tax system.
The case for the amendment is overwhelming and conclusive. Within our tax system we acknowledge the case for favourable treatment for people over retirement age. There is a special age allowance in relation to their income as a whole—principally, of course, on their earned income—which was introduced


under considerable pressure from this side of the Committee and other quarters two or three years ago. There is a special threshold for investment income surcharge, which is currently under debate and which the Government propose to raise from £1,500 to £2,000 for those who qualify.
That is all absolutely right and proper. I support it totally and I have urged before that we should have this special treatment for the retired section of the population. Many of us on this side would like to see these reliefs go further and become more generous.
The problem covered in my amendment is that when we come to define who should gain and who should not gain from the special concessions—which I take as being concessions for the retired—a form of male chauvinism takes over. The Treasury, the Inland Revenue and the law define the rule in terms of the age of 65, which is the normal retirement age for men. Instead of applying to women their normal retirement age of 60, the Government say that they, too, should receive the benefit of the additional tax reliefs only when they reach the age of 65. That is, we apply to women the normal male retirement age in allowing additional tax reliefs.
I have said previously in such debates that we drop single women and widows into a hole between the social security system, which treats them as retired at the age of 60, and the tax system, which treats them as being retired in this case at the age of 65. There is a five-year fiscal limbo into which we cast a substantial group of the population.
That is totally unfair, because in the world as it now is single women and widows of that age have already suffered a harder time than men of that age. Whatever the position may be in the new world of liberation and equality into which we are now moving, women now reaching retirement age tend to have had less earning power and to have been less able to save for their retirement.
Such women have laboured under disadvantages because of social attitudes in the past, attitudes that still linger to some extent, yet in addition to that we lumber them with this disadvantage. We do not allow them in their first five years of retirement the benefits that we think

are proper for retired men within the tax system.
I said that this represents a form of male chauvinism, but it is worth registering how serious the anomalies can be. A man aged 50 or even 40 or 30 who happens to be married to a woman aged over 65 will get the benefit of this allowance because the law is defined in terms of a man or his wife living with him being over the age of 65. It does not matter how young the man is. Provided his wife is over the age of 65, he will receive additional tax relief on investment income, although a woman alone cannot receive that relief until she reaches the age of 65. One cannot be much more male chauvinist than that.
The situation is utterly unfair and I find it even more difficult to accept that it should be allowed to continue when I consider the triviality of the cost involved to put it right. That is especially so in the context of the debate that we had yesterday on petrol. When I raised this matter last year in two separate amendments—one dealing with single women and one dealing with widows—the Chief Secretary gave some figures of the cost of such relief. At that time the surcharge threshold was £1,500, so the figures are a little out of date, but the difference cannot be very great.
I was told that to extend the investment income surcharge relief to all widows—not just those over 60—would cost only £1½ million. To extend it to the other single women over 60 would cost £1 million. The money involved is peanuts in the context of the arguments that we have on this Bill and my proposal cannot be resisted on that ground.
9.45 p.m. 
To be fair to them, I do not believe that Ministers would attempt to resist it on that basis. What other arguments do they have? It has been suggested that the real unfairness is in the difference in retirement ages. Treasury Ministers have said that I might have a point, but the real trouble is that women are allowed to retire too early or that men are made to retire too late and we should be equalising retirement ages.
I agree with that argument, but that is not what happens and we are treating women aged between 60 and 65 unjustly. The fact that we should like to see a


change in retirement ages in the long term is neither here nor there. The logic of that ministerial argument is that the retiring age for women should be raised. That suggestion is not widely heard.
The widely heard suggestion is that the retiring age for men should be reduced. There is widespread support for that on both sides of the House. However, even at Question Time today Social Security Ministers were resisting any move in that direction on the ground of cost.
As long as Ministers are saying that it is not practicable to move towards what we should like to see in the social security system, it is up to them to deal with the parallel injustice in the tax system. I hope that we shall hear something more constructive from Ministers, because their arguments so far have not been good enough.
The only other point that the Chief Secretary put to me last year in a debate on roughly similar amendments was a virtual accusation that I was seeking to discriminate between different groups of taxpayers. That is standing the argument on its head. The Chief Secretary said:
The best way to deal with the matter is to deal with it on income."—[Official Report, 11th May 1976; Vol. 911, c. 401.]
That does not mean anything. How can we deal with the problems of retired women aged between 60 and 65 through dealing with their income? If that means anything at all, it must mean dealing with it through the social security system, and through their pensions. Can any Minister seriously claim that there is the slightest chance, prospect or justification for paying women aged between 60 and 65 a higher pension than we pay women over 65 in order to offset the effects of the tax system? That is the only thing that the Chief Secretary could have meant and it is nonsense.
Arguments against the modest cost that I am proposing do not stand up. The number of people involved in investment income surcharge cannot be large. The number of single women and widows aged between 60 and 65 is probably in the thousands rather than the millions or even hundreds of thousands. The numbers argument is much more important on the age allowance that we shall be debating upstairs.
However, the injustice is no less clear for the fact that it is a relatively limited point affecting relatively few people. It is part of the growing bitterness felt by widows and, to some extent, by single women in comparable circumstances about how our tax system treats them. It is difficult to defend.
I had hoped that we should see something done about this in the Budget, because earlier this year, for the first time in my experience, a Minister made a reasonably encouraging noise about it. I put this on the record because it is worth repeating to the Committee. I asked the Minister of State, Treasury:
Is the hon. Gentleman aware that, apart from the disincentive to working widows, one of the most serious injustices in the tax system is the treatment of widows and single women between the ages of 60 and 65? Does he accept that something must be done about this problem?
The Minister of State replied:
The hon. Gentleman is right. The problem is most acute for those women aged between 60 and 65 because the age allowance is not available then. For women over 65 age allowances are quite generous and take widows out of the tax net. However, I accept that there is a problem for women aged between 60 and 65."—[Official Report, 24th February 1977;Vol. 926, c. 1620.]
I was very glad when the Minister said that. I took it as a hint that the Treasury hearts might be about to soften in the couple of months before the Budget. I am very sorry indeed that they did not.
I hope that we shall have some sign from the Financial Secretary to the Treasury tonight that the Government will take another look at this matter, because I believe that there is great concern about it on both sides of the House. The way in which these women are treated is indefensible, and it would cost us very little to do a bit of justice in this matter.

Mr. Cyril Smith: I support the case made by the hon. Member for Braintree (Mr. Newton). One of the principal reasons why I support him is that the proposal would do a little to alleviate discrimination against some widows and, indeed single women.
I should like to see the Government tackle the whole question of widows' benefits, tax allowances and so on and move towards a position in which we had a householder's allowance for tax purposes, irrespective of whether a person


was widowed, single, married or anything else. The allowance would be paid because a person had to maintain a home and not because he or she happened to be married or single.
Widows get a very raw deal. The hon. Member's amendment would at any rate assist a small section of them. It is worthy of support if for no other reason than that. The older a woman is when she becomes a widow, the more difficult it is for her to adjust to new styles of living, income and so forth. There is great need, therefore, for the State to assist women who find themselves in that plight.
I compliment the hon. Member on having moved the amendment and for the manner in which he moved it. I hope that the Government will find it possible to make a concession in this matter. I hope that there will be a wider concession to assist widows generally, but at this stage it would be of great assistance if the Government were to help these particular widows between the ages of 60 and 65.

Mr. Graham Page: I support my hon. Friend the Member for Braintree (Mr. Newton). He has sought year after year to obtain this concession, and I hope that this will be a successful occasion for him.
This provision in our tax law might have been written by Lewis Carroll, Gilbert and Sullivan and the late A. P. Herbert all rolled into one. It is a most extraordinary provision that a man, whatever his age, will get the benefit of relief from the surcharge provided that his wife is over the age of 65. Could there be anything more foolish in our tax provisions than that?
We must add to that situation the fact that a widow or single woman who reaches the age of retirement at 60 is not entitled to this relief, whereas a man at retirement age is so entitled. In law we recognise the retirement age of 60 for women and 65 for men, yet we do not recognise it in this relief. Treatment of widows between the ages of 60 and 65 appears in this instance to be most illogical and unjust. It is extraordinary that year after year we should continue this discrimination.
It is true that a married woman does not reach the theoretical retiring age until her husband reaches 65. In other words,

if she reaches 60 she is not entitled to consider that she has retired until her husband reaches the age of 65. However, that is not the case in this context. We are talking about widows and single women of that age. We are also talking about investment income, which in general means savings, and savings in the case of a widow or single woman of this age are far more difficult to achieve than for men. The present situation is a disincentive for such a woman to seek to provide for herself.
As was emphasised by my hon. Friend the Member for Braintree, the cost in this context is infinitesimal compared with the other matters which we consider in the Finance Bill. I hope that we shall right this injustice in the present Finance Bill. I hope that we shall do away with this "Alice in Wonderland" provision in relation to surcharge. Therefore, I warmly support the amendment.

Mr. MacGregor: I wish to support the amendment, with which I am associated. I support it, but I wish to add a caveat to which my hon. Friend the Member for Braintree (Mr. Newton) referred. In the long term we shall have to sort out the disparity as to the age at which men and women retire. It is clear that many women wish to continue working beyond the age of 60, and we have come to accept the concept of equality at work. I appreciate that pressure is now being mounted for men to be able to retire at the age of 60, but I tend to share the Government's view that in current circumstances this would be expensive. Since I am realistic, I do not see that aim being achieved for many years ahead. I believe that in the long run, however, this anomaly will have to be sorted out.
I was fascinated to read a recent pamphlet written by Mr. Michael Pilch of Noble Lowndes, who is a colleague of mine since I am involved in a company which is associated with his company. It was a pamphlet which Mr. Pilch wrote on his own account and in which he put forward suggestions by which we could move more flexibly to a situation in which it was possibile to deal with the transitional stage in arriving at a mutual retirement age. I am sure that we shall have to give more thought to this difficult problem in the coming years. That is my caveat—namely, that we should seek to obtain an identical retirement age but that it


is a long way off. Meanwhile, we have to face the present anomaly.
10 p.m.
I support the amendment for two reasons. First, it is clear that the anomaly in the present state of the law concerning tax treatment and pension treatment must be cleared up. Secondly, there is the anomaly, which will apply for the next five to 10 years, in relation to the retirement age for women of 60 and beyond. I have great sympathy with this group of people for a wide variety of reasons. It is true that if only we could raise the tax threshhold much more significantly for all taxpayers—a point that we have argued in previous Finance Bill debates—the position of these widows would be much improved. I am sure that hon. Members on both sides will agree that we are constantly being berated by widows because of their tax position. If we cannot raise the tax threshold to the level that we should like, let us at least try to deal with this situation.
The reason why I have particular sympathy with widows and single women covered by this amendment and the amendment on age allowance that my hon. Friend is to move in Committee is as follows. Most young women, certainly before they marry, and many married women returning to work after having children find it easy to return to work, but the age group that we are talking about has found it difficult to do so. It was not normally the practice for them to obtain work. Work opportunities were much more limited than they are today, so they are probably very dependent not only on their widow's pension—much more so than later generations, who will have occupational pensions—but on such investment income as they can obtain, which has probably been raised through their husbands' savings in the case of the widows or their parents' savings in the case of the single women. Single women in this age group have probably not had a job for long in their lives. Not many years ago they looked after their parents until it was too late to obtain a job.
For those reasons, over the next five or 10 years, before we can sort out the whole pension situation, these groups will face particular difficulties. My hon. Friend is right to draw attention to this

anomaly, and his amendment should be supported.

Mr. Robert Sheldon: We have had debates on this subject from time to time. They are always among the more difficult debates to reply to, largely because we are faced with anomalies of the type that the hon. Member for Norfolk, South (Mr. MacGregor) frankly recognised.
It is a little easier to reply to this amendment than some of the amendments put forward in the past which dealt especially with the problems of widows. With widows there is a dual problem—that referred to by the hon. Member for Braintree (Mr. Newton) and the emotional problem with which we are all familiar and to which there is no simple solution. Taxation can put right a number of things, but it cannot deal with some of the gravest problems that people face, such as the loss of a husband. This has usually been a complication when trying to analyse and discuss the matter dispassionately.
The amendment now before the Committee is much simpler than former amendments as it deals with women generally. Here we are discussing only the women's age and whether the ability to obtain the advantage of the higher investment income surcharge threshold should be given to them at their retirement age of 60 or, as in the case of men, at 65.
I remind the Committee that these problems have been with us for 40 to 50 years. The Royal Commission agreed that the age of retirement and the age at which women became eligible for other advantages should be regarded as separate issues. This is not simply a question of anomalies. It reflects the way in which social patterns are changing. The hon. Member for Norfolk, South made a brief reference to this. He understood that, fundamentally, what we do in any tax system is to reflect social circumstances and our attitudes to them. Inevitably in these matters there is a fair time lag in making tax changes consequent upon our perception of social circumstances. This problem becomes greater when social circumstances are changing.
The hon. Member for Norfolk, South referred to the way in which women are now able to claim greater equality. There will obviously be fewer problems in the


future than there are today. He will be aware that certain problems pertain to this matter. I understand the point made by the hon. Member for Rochdale (Mr. Smith) about this matter and about householders' allowances. He will be aware that certain problems appertain to that matter.
The main problem is not only changing social circumstances, with which we have to come to grips, but the way in which men will perceive their position. At present men have to wait five years longer than women for their pensions. We know that men tend to live for shorter periods than women after retirement age. Men are increasingly aware of this factor. There is the further problem that, if men have to wait longer for investment income surcharge relief or any other kind of advantage than women, it might strain their patience even more.
The Government have to take account of the various social strands and try to produce equitable solutions. The hon. Member for Norfolk, South suggested that the only perfect solution would be for the retirement age somehow to be made the same and to reflect changing social circumstances. How much time lag there would be between the one and the other is a matter for argument. Some benefit from social changes much later than others.
Those are the problems facing us. In view of the difficulties, we might replace a lesser anomaly with a greater one. The hon. Member for Braintree was right to point to the anomaly that a woman retires at 60 years of age and does not get the invesment income surcharge relief until she is 65. If she were to get the relief at 60 years of age, that would reduce one anomaly but would create another. Both men and women at present qualify for the investment income surcharge relief at 65 years of age. If women were to qualify for relief at 60 years of age, that would create an another. Both men and women at present do not qualify for the relief between the ages of 60 and 65. It is oversimplifying the matter to say that we should reduce the anomalies. In one sense we should, but in another sense we should not.

Mr. Rifkind: I am trying to follow the right hon. Gentleman, but I find it difficult to understand the strength of the argument that he is putting forward.

Surely relief on investment income surcharge is given at the age of retirement for men because at that time—not before—they cease to have an income from earnings and become increasingly, if not entirely, dependent on income from investment sources. If that is the whole basis of the relief for men, given that many women are obliged to retire at 60, it would not be anomalous but would coincide with common sense to provide relief at 60.

Mr. Sheldon: That is not the argument which has been put over by successive Governments. The argument has been that certain disadvantages are experienced by old people in their ability to carry out some of the everyday tasks that they have to undertake. It is right that there should be an increased allowance to take account of old age. That is not the same thing as retirement. We are talking of age. That is one of the problems that must be considered.
One can never say that the decisions that we take now are for all time. That is inherent in the nature of tax, which reflects social attitudes. However, even at this time of change in the circumstances which we have discussed, the present position should be retained. However, as I have said, these matters are examined from time to time.

Mr. Graham Page: Can the Financial Secretary say what the cost would be at present? The matter was raised by my hon. Friends and myself. It is important that the Committee should know what it would cost. If the sum involved is small, we hope that the Government will give way.

Mr. Sheldon: I do not know the cost but it is unlikely to be large. It is difficult to estimate.

Mr. Newton: I do not wish to take up too much time. Much as I respect the Financial Secretary, his speech was a classic example of a Treasury Minister under pressure using words to cloak the absence of an argument. I sympathise with my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind) in saying that he could not follow the Minister. I doubt whether the Minister was following what he said himself.
My hon. Friend the Member for Norfolk, South (Mr. MacGregor) spoke cogently in support of the amendment.


His argument was stood on its head by the Financial Secretary with all his waffle about social circumstances. We know that circumstances are changing and that the position of women between the ages of 60 and 65 may be different in 25 years' time. The whole burden of the argument, however, is that in the social circumstances as they are now the tax system should take account of them as they are now. If it did that, it would provide the advantages of tax relief for women between the ages of 60 and 65 and not refuse them until they are 65.
The argument that the decision is made on the ground of age and not of retirement is utterly ludicrous. There can be no justification for choosing to give special benefits to taxpayers at 65 other than that it is the normal retirement age for men. The normal retirement age for women is 60. We should recognise that and give the same tax allowances to single women and widows, instead of leaving them in a fiscal limbo until they are 65.
I shall not press the amendent to a Division, because we shall return to the matter upstairs in Committee when we consider the wider question. I serve notice to the Financial Secretary—and I speak for other hon. Members—that we shall return to this subject again and again until something is done or until we receive more sensible and acceptable answers.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Jack Ashley: I beg to move Amendment No. 23, in page 11, line 23, after 'more' insert:
'or either he or his wife living with him was in receipt of invalidity benefit or non-contributory invalidity pension'.
I shall make a short speech. The amendment is supported by the hon. Member for Exeter (Mr. Hannam).
The amendment extends to invalidity pensioners relief from the 10 per cent. investment surcharge on the first £500 of the excess above £1,500 of unearned income. I am not usually concerned with people who derive unearned income—normally I could not care less about their

problems—but the amendment concerns a specific and particular point. I seek for disabled people a concession which is already enjoyed by old-age pensioners. Presumably on the ground that they no longer work, it is considered wrong to penalise them for having unearned income and that the penalty is less appropriate for old people. Exactly the same consideration applies to disabled people of normal working age who are incapable of working. Disabled people should be treated in exactly the same way as old-age pensioners.
10.15 p.m.
Retirement pensioners also enjoy relaxation of the earnings rule and investment income surcharge relief, but disabled people of working age have no such advantage, and if they earn more than £9 a week they lose their entitlement to invalidity benefit. Therefore, to tax this so-called unearned income at a higher rate than that applied to able-bodied contemporaries is quite unjustifiable. If the amendment is not passed, the discrimination against disabled people will be perpetuated.
The amendment would give only marginal relief. Its costs would be minimal, and the categories of people who would be most likely to benefit are those who are very gravely disabled and who are receiving compensation, such as thalidomide children, who are now reaching working age. It is important to avoid discrimination against people of that kind. Other disabled people who would be helped would be those who have been left a little money by anxious and harassed parents who have been concerned about what will happen when they die.
I should like the Minister to bear in mind that the possession of this small amount of capital by disabled people is likely to disqualify them from receiving supplementary benefit because the supplementary benefit system is designed to eat up that small amount of capital.
In conclusion, I believe that disabled people should be treated in the same way as elderly people who get extra tax relief because they cannot earn. Severely disabled people cannot earn either. Various representations have been made to the Treasury that disabled people should be helped in this way. The Treasury's reply


is that disabled people should be helped through the social security system as tax relief does not help the poorest and is less flexible. That is a fine standard argument, but it does not take account of the fact that disabled people have received the compensation of which I am speaking because of their loss of earning capacity, and their compensation should be treated for tax purposes as earnings. It is quite unfair that they should pay more tax than someone who gets the same amount through unearned income.
The people in the Treasury are not the ogres that they are sometimes made out to be. They have a very difficult job to do. Everyone makes demands. I think that my right hon. Friend the Financial Secretary will recognise that, by and large, I support the people in the Treasury. I have said publicly and privately that I support the Treasury in its very difficult tasks. However, the point I want to make now, in addition to the point about helping disabled people, is that that support does not mean that one must become a voting zombie, and it must not entail automatic support for the Government. I propose, therefore, to press the amendment to a Division, conscious of the fact that many hon. Members have gone home already and that I shall not receive the support in the Lobby that the amendment ought perhaps to have. Nevertheless, I put forward the amendment with all the good will in the world, recognising the problems of the Treasury but hoping that my right hon. Friend will see fit to accept the amendment rather than to force a Division.

Mr. Robert Sheldon: My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) is one of the more beguiling Members of the House, and if I were able to assist him in his great campaigns there are few things that would give me greater pleasure. He has taken up a number of the most worthy and deserving causes that have ever come to the attention of the House. In his campaigns the House knows that he is eager to help and he seeks ways in which he can provide assistance to people who are the most unfortunate among our fellow citizens. He seeks to do that in every way he is able to pursue.
I do not think I am misrepresenting my hon. Friend if I comment that if there

were better opportunities to help the people whom he wishes to help he might not regard this amendment as the most important method that he could use.
One of the things about the tax system is that it is a very crude instrument for providing direct assistance, which is the best form of assistance for people in greatest need. We have this difficulty about the use of the income tax system for social security purposes. One can find oneself constructing an enormously complicated and parallel system—and because it is parallel it is less useful—to duplicate the work of the social security system.
The main advantage of the social security system is that it gives the greatest help to those with the greatest need because it pinpoints and focuses attention in a much more refined way on the areas where need is greatest. However, the income tax system, being a much more diffused operation, assists those who have the most money to the greatest extent and those who need assistance least.

Mr. Ashley: I appreciate what my right hon. Friend is saying. Is he objecting in principle? I recognise the principle. Has he costed this exercise? If so, can he tell the Committee how much it would cost for the Government to accept the amendment, so that we may have some idea of the added magnitude? Is it principle or cost, or both?

Mr. Sheldon: It is very hard to ascertain the exact amount, but I would not expect it to be large. But here we have the problem of bringing the investment income surcharge threshold into new areas, and there are a number of administrative complexities and disadvantages. It also has the real defect of helping only those who, by the standards that my hon. Friend is using, are not those with the greatest financial problems. They would need to have capital capable of generating £2,000 a year. The amount of capital required for that is considerable. Of course, it is unlikely that they will have capital for generating that income if, at the same time, they have used some of their capital on something like buying a house, for example. We are not talking about the main area of concern in which my hon. Friend is trying his utmost to help.
I am grateful for what my hon. Friend said about the Treasury, but in the end we have to concern ourselves with those in greatest need. There are those who are disabled but ineligible for benefit. A distinction would be drawn between such people and those whom my hon. Friend has in mind. Although I am happy to assist him whenever I can, I regret that on this occasion I am unable to accept the amendment that he has so movingly put forward.

Mr. Ashley: I greatly appreciate my right hon. Friend's speech. If anything could persuade me not to press the amendment, that speech would. However, I intend to press it, for good reasons. First, the thalidomide children

are a special category of disabled and they are the main ones who would benefit from the amendment. Second, the Minister has admitted that it would not cost very much. Third, I do not believe that it would damage the Government in any considerable way if the amendment were passed. Fourth, I believe in the principle of helping specific groups with particular problems.
My respect for the Treasury grows. I have said some harsh things about the Treasury recently—some, but not all, of which I meant—but I now withdraw any personal attacks. Nevertheless, I propose to press the amendment in the spirit in which I have moved it and in which my hon. Friend has replied to it.

Amendment negatived.

Amendment proposed: No. 24, in page 11, line 25, at end insert:
'and
(ii) the tax payable by an individual in respect of his earned income shall not exceed one half of such income.
(2) For the purpose of subsection (1) above the tax applicable to a person's earned income is such proportion of the income tax (other than income tax at the additional rate) borne on his total income as his earned income bears to the aggregate of his earned income and his investment income, and for this purpose" investment

income" has the same meaning as in section 32 of the Finance Act 1971.

(3) For the purpose of subsection (2) above deductions from total income under Chapter 11 of Part I of the Taxes Act shall be disregarded and no reduction shall be made for any deductions of a type specified in subsection (3) of section 528 of the Taxes Act or under section 75 of the Finance Act 1972'.[Mr. Pardoe.]

Question put, That the amendment be made:—

The Committee divided: Ayes 16, Noes 199.

Division No. 131]
AYES
[10.31 p.m.


Carlisle, Mark
MacGregor, John
Thorpe, Rt Hon Jeremy (N Devorn)


Cope, John
Newton, Tony
Wigley, Dafydd


Durant, Tony
Penhaligon, David



Evans, Gwynfor (Carmarthen)
Ross, Stephen (Isle of Wight)
TELLERS FOR THE AYES:


Grimond, Rt Hon J.
Sinclair, Sir George
Mr. A. J. Beith and


Howells, Geraint (Cardigan)
Smith, Cyril (Rochdale)
Mr. John Pardoe.


Hunt, David (Wirral)
Thomas, Dafydd (Merioneth)





NOES


Abse, Leo
Evans, Fred (Caerphilly)
Loyden, Eddie


Allaun, Frank
Evans, Ioan (Aberdare)
Luard, Evan


Archer, Peter
Ewing, Harry (Stirling)
Lyon, Alexander (York)


Armstrong, Ernest
Faulds, Andrew
Lyons, Edward (Bradford W)


Ashley, Jack
Flannery, Martin
Mabon, Rt Hon Dr J. Dickson


Atkins, Ronald (Preston N)
Fletcher, Ted (Darlington)
McCartney, Hugh


Atkinson, Norman
Foot, Rt Hon Michael
McDonald, Dr Oonagh


Bates, Alf
Ford, Ben
McElhone, Frank


Bean, R. E.
Fowler, Gerald (The Wrekin)
MacFarquhar, Roderick


Bennett, Andrew (Stockport N)
Fraser, John (Lambeth, N'w'd)
MacKenzie, Gregor


Bidwell, Sydney
Freeson, Reginald
McMillan, Tom (Glasgow C)


Bishop, E. S.
Garrett, John (Norwich S)
McNamara, Kevin


Blenkinsop, Arthur
George, Bruce
Madden, Max


Boardman, H.
Gilbert, Dr John
Mahon, Simon


Booth, Rt Hon Albert
Golding, John
Mallalieu, J. P. W.


Boothroyd, Miss Betty
Gourlay, Harry
Marks, Kenneth


Brown, Hugh D. (Provan)
Graham, Ted
Marshall, Jim (Leicester S)


Buchan, Norman
Grant, George (Morpeth)
Maynard, Miss Joan


Buchanan, Richard
Grant, John (Islington C)
Meacher, Michael


Callaghan, Jim (Middleton &amp; P)
Hamilton, James (Bothwell)
Mendelson, John


Campbell, Ian
Harper, Joseph
Millan, Rt Hon Bruce


Canavan, Dennis
Harrison, Walter (Wakefield)
Miller, Dr M. S. (E Kilbride)


Cant, R. B.
Hart, Rt Hon Judith
Mitchell, Austin Vernon (Grimsby)


Carmichael, Neil
Hatton, Frank
Molloy, William


Castle, Rt Hon Barbara
Hayman, Mrs Helene
Moonman, Eric


Clemitson, Ivor
Hooley, Frank
Morris, Alfred (Wythenshawe)


Cocks, Rt Hon Michael
Horam, John
Morris, Charles R. (Openshaw)


Cohen, Stanley
Howell, Rt Hon Denis (B'ham, Sm H)
Morris, Rt Hon J. (Aberavon)


Coleman, Donald
Hoyle, Doug (Nelson)
Moyle, Roland


Conlan, Bernard
Hughes, Robert (Aberdeen N)
Murray, Rt Hon Ronald King


Cook, Robin F. (Edin C)
Hunter, Adam
Newens, Stanley


Corbett, Robin
Irvine, Rt Hon Sir A. (Edge Hill)
Noble, Mike


Cowans, Harry
Irving, Rt Hon S. (Dartford)
Oakes, Gordon


Crawshaw, Richard
Jackson, Colin (Brighouse)
Ogden, Eric


Crowther, Stan (Rotherham)
Jackson, Miss Margaret (Lincoln)
Orme, Rt Hon Stanley


Cryer, Bob
Jenkins, Hugh (Putney)
Ovenden, John


Cunningham, G. (Islington S)
John, Brynmor
Padley, Walter


Davidson, Arthur
Johnson, James (Hull West)
Palmer, Arthur


Davies, Denzil (Llanelli)
Jones, Alec (Rhondda)
Park, George


Davis, Clinton (Hackney C)
Jones, Barry (East Flint)
Pavitt, Laurie


Deakins, Eric
Kaufman, Gerald
Pendry, Tom


Dean, Joseph (Leeds West)
Kerr, Russell
Price, William (Rugby)


Dell, Rt Hon Edmund
Kilroy-Silk, Robert
Radice, Giles


Dempsey, James
Kinnock, Neil
Rees, Rt Hon Merlyn (Leeds S)


Doig, Peter
Lambie, David
Richardson, Miss Jo


Douglas-Mann, Bruce
Lamborn, Harry
Roberts, Albert (Normanton)


Dunn, James A.
Lamond, James
Roberts, Gwilym (Cannock)


Dunnett, Jack
Latham, Arthur (Paddington)
Robinson, Geoffrey


Eadie, Alex
Lestor, Miss Joan (Eton and Slough)
Rodgers, George (Choriey)


Edge, Geolf
Lever, Rt Hon Harold
Rooker, J. W.


Ellis, John (Brigg &amp; Scun)
Lewis, Ron (Carlisle)
Ross, Rt Hon W. (Kilmarnock)




Rowlands, Ted
Stoddart, David
White, James (Pollok)


Sedgemore, Brian
Stott, Roger
Whitlock, William


Selby, Harry
Strang, Gavin
Williams, Rt Hon Alan (Swansea W)


Sheldon, Rt Hon Robert
Taylor, Mrs Ann (Bolton W)
Williams, Sir Thomas (Warrington)


Shore, Rt Hon Peter
Thomas, Jeffrey (Abertillery)
Wilson, Alexander (Hamilton)


Short, Mrs Renée (Wolv NE)
Thomas, Mike (Newcastle E)
Wilson, Rt Hon Sir Harold (Huyton)


Silkin, Rt Hon John (Deptford)
Thomas, Ron (Bristol NW)
Wilson, William (Coventry SE)


Silkin, Rt Hon S. C. (Dulwich)
Thorne, Stan (Preston South)
Wise, Mrs Audrey


Silverman, Julius
Tierney, Sydney
Woodall, Alec


Skinner, Dennis
Tinn, James
Woof, Robert


Small, William
Torney, Tom
Wrigglesworth, Ian


Smith, John (N Lanarkshire)
Varley, Rt Hon Eric G.
Young, David (Bolton E)


Snape, Peter
Wainwright, Edwin (Dearne V)



Spearing, Nigel
Walker, Terry (Kingswood)
TELLERS FOR THE NOES:


Spriggs, Leslie
Ward, Michael
Mr. Thomas Cox and


Stallard, A. W.
Watkins, David
Mr. Joseph Ashton.


Stewart, Rt Hon M. (Fulham)
White, Frank R. (Bury)

Question accordingly negatived.

Clause 15 ordered to stand part of the Bill.

Clause 21

CHILD BENEFIT AND OTHER BENEFITS IN RESPECT OF CHILDREN

Mrs. Wise: I beg to move Amendment No. 31, in page 13, line 12, leave out from 'deemed' to end of line 15 and insert:
'to exclude any of the payments made in respect of that child as listed in subsection (4)'.
The Committee might find the amendment a little cryptic, and it is therefore necessary to explain its purpose and how it arises. Unfortunately, subsections (3) and (4), with which the amendment deals, are themselves cryptic and difficult to follow, so I had better begin by explaining their purpose.
An anomaly was created, through the introduction of the child benefit scheme, for widows and certain other people receiving State allowances. Those people were to lose £1 from their allowances and also the appropriate part of the child tax allowance. This was to be replaced only by the single payment of £1 child benefit. Therefore, whereas other taxpayers would lose the child tax allowance, with the child benefit moving in to balance up the payment in their favour, that was not so in the case of widows, who would actually be worse off. The Government therefore took appropriate action to remedy that anomaly, and I am at one with them in that.
However, in considering subsections (3) and (4) it seemed to me that there was an opportunity for improving the situation of widowed mothers, guardians and those receiving certain other State allowances for children. I believed that

it would be a pity to miss that opportunity.
The effect of the amendment is therefore to exclude from the reckoning of the taxable income of the parent concerned not only £52 a year—the equivalent of the child benefit—but the whole of the amount being paid by the State in respect of that child. Therefore, under the amendment the whole of the widowed mother's allowance attributable to the child or children would be excluded from the reckoning. That would, of course, have the effect of improving considerably the tax position of widows and certain other one-parent families and guardians. The people concerned are listed in Clause 31(4). but those who scrutinise the list may not find it crystal clear about those to whom the payments refer.
10.45 p.m. 
Perhaps I should explain that, for instance, in Clause 31(4)(a) the child's special allowance under the 1975 Social Security Act relates to the amount that is paid in respect of a child or children to a divorced woman whose ex-husband has died. The guardian's allowance is the amount that is paid to guardians in cases where both parents have died or where one parent has died and the other is missing, or where one parent has died and the other parent is in prison.

Mr. Patrick Jenkin: I am trying to follow the hon. Lady's argument, Can it be stated, briefly, that she is arguing that the child benefit should become a payment on top of social security benefits rather than instead of them?

Mrs. Wise: No. I mean that there is a constant complaint that widows and other people in receipt of similar benefits are penalised by the tax system at least to this extent. I am arguing not that the child benefit should be an additional


payment but that the amount paid to a widow in respect of children should be tax-free. We are often told that the whole of a widow's pension should be tax-free, but I am not asking for that now. I am asking only that the amount paid in respect of children should be tax-free. That would be worth while. There are, of course, other things that I should prefer, but I am inevitably forced into a rather messy approach because we on the Back Benches have to work on the basis of things that are put before us. If we were starting with a clean sheet, I should like to have a greatly uprated child benefit and I should prefer other things to be more neat and tidy.
However, it must be said that child benefit was in any case designed specifically to help families with two parents rather than those already in receipt of State benefits. That is why a widow is docked £1. It is because the child benefit is not specifically designed to help the widow. The effect of this amendment would be to relieve from taxation the amount of the widow's benefit which relates to children.

Mr. Robert Sheldon: My hon. Friend said that £1 is docked from the widow. Does she understand that the widow is no worse off and that the purpose of the clause is to ensure that that is so?

Mrs. Wise: I understand that the purpose of Clause 21 (3) and (4) is to ensure that widows are not worse off as a result of the introduction of child benefit.

Mr. John Ovenden: Is my hon. Friend aware that widows are the one category of people who are no better off as a result of child benefit and that while two-parent families, where the husband is paying the standard rate of income tax, are 30p a week beter off as a result of child benefit, widows do not have a net gain? Is that a fair situation?

Mrs. Wise: It is precisely because I want widows with children, and guardians and those who are receiving industrial death benefit, to be better off that I am introducing the amendment.
I have no complaint about the clause as far as it goes. It is intended to remove the anomaly that leaves widows and others worse off. The Government want to bring them back to square one. That is fine as far as it goes, but it does not go far enough.
All hon. Members know that there is considerable pressure from widows and that the pressure is particularly justified in relation to their children. That is why I am not seeking to relieve from tax all the widow's pension or any part other than that relating to children. I am endeavouring not only to bring them back to square one but to take them on a little to square two or three. That is a very desirable objective.
I shall explain the categories to whom clause 21 (4) applies because some hon. Members may not be aware of them. Subsection (4) (b) refers to an allowance under Section 70 of the Social Security Act 1975, namely, the industrial death benefit and the amount paid to a widow for the children whose father has been killed in an industrial accident.
Subsection 4 (c) is self-explanatory and includes the widow's allowance which widows receive for the first six months. The amendment would affect only that part of the allowance relating to children. The same applies to the retirement pension, for the few pensioners who have dependent children. The widowed mother's allowance and the invalid care allowance, which also are listed in subsection (4) (c), are self-explanator.
The amendment should meet with approval, especially on this side of the Committee. We are aware that families with children are often hard-pressed. Families with only one parent are particularly hard-pressed. We should like to have found a way of helping all one-parent families, but it was not possible under the clause.
Within the limits of what is possible within this clause, the amendment helps as many one-parent families as is humanly practicable. I commend it to the Government Front Bench and hope that Ministers will accept it. They would have found it easier to accept if they had accepted our earlier amendment in which we tried to find the money for this amendment. It is not our fault if our Front Bench, aided and abetted by Opposition Members, ensured that tax concessions would go to the better off. We tried to find the money to help poorer people. The Government flung that back in our faces, and I suggest that they must now find that money from somewhere else.
I commend the amendment Lo the Committee. It is designed specifically to help


widows and others with children in relation to the income they receive from the State for those children.

Mr. Patrick Jenkin: I listened to the hon. Member for Coventry, South-West (Mrs. Wise) with considerable attention. I am not sure that she has explained the purpose of her amendment accurately. It seems to me—I might be wrong, but this is a measure of the complexity that we face—that subsections (3) and (4) are intended, following the change of last September to which I might refer later in the debate on the Question "That the clause stand part of the Bill", to reflect the broad proposition that child benefit is intended primarily to help those who, in the words of Frank Field, earn their poverty, those who are earning but who do not get the benefit of the child tax allowance.
If that is right—and I believe that it is at the core of the whole system and was always envisaged with child tax credits which were the subject of the Green Paper published by the previous Conservative Government—it must follow logically that, where families are getting other benefits from the State through the social security system, to that extent the child benefit comes in substitution for those other benefits and not in addition to them.
It is a separate question whether one needs to make some additional provision for widows. That has been argued on other occasions. These provisions go a good deal wider than widows. They refer to people in receipt of retirement pension, invalid care allowance and so on. It is not only one-parent families.
The point about widows—perhaps I shall take the hon. Lady with me here—is that when the Government made their announcement on 23rd September they forgot about them. They forgot that widows had not suffered the clawback of their family allowance. As soon as the Government published the results of their study and announced a change of tack for the second time in child benefit, the organisations representing widows and one-parent families, Gingerbread and others said "You are making them worse off by £1 a week". The Government did not address their mind to widows, but that is a matter that can be pursued on another occasion.
The Government then had to announce a special £52 addition which put the widows back, as the hon. Lady said, to square one, but one cannot move on from that within the framework of the child benefit scheme and say that chid benefit will be paid in addition to the national insurance benefit, which is what the hon. Lady's amendment provides, whatever she may have said.

Mrs. Wise: The right hon. Gentleman is wrong. My amendment is not working within the framework of the child benefit scheme. It is working within the framework of the tax scheme, which is different.
It may be that the Government included subsections (3) and (4) in the clause because of child benefit. That is their problem which they are solving, but it is not the problem to which I have addressed myself.
My amendment is not about the child benefit scheme. Any wide discussion about child benefits would be out of order. My amendment is about giving tax concessions to widows and certain others on low incomes. The right hon. Gentleman is right in saying that it is not only widows who are concerned but pensioners with dependent children and some others.
That is what the amendment is about. It is not about child benefit. The fact that the Government had to tidy up the situation because of child benefit gave me the opportunity to put forward the amendment, but it is not about child benefit. If the right hon. Gentleman wants to discuss child benefit, I suggest that he does it on the Question "That the clause stand part of the Bill".

Mr. Jenkin: It is all very well for the hon. Lady to say that. It may have done for procedural reasons, but the amendment is hung on these provisions which are the direct consequence of the decision that child benefits should be a tax-free benefit and that the child tax allowance should be reduced.
11.0 p.m. 
I have been studying the Questions which a number of hon. Members below the Gangway on the Government side have been putting down on the subject. The hon. Member for Gravesend (Mr. Ovenden) is one and the hon. Member


for Kingston upon Hull, East (Mr. Prescott) is another. It seems to have come as a surprise to them—so much so that the amendment is starred—that child benefit will be in substitution for national insurance benefits, and, indeed, for a wide range of means-tested benefits, and not in addition to them.
I do not know why that should be so. It should not be so, because on 8th November my hon. Friend the Member for Wallasey (Mrs. Chalker) asked the Secretary of State for Social Services
'whether he will confirm that under the Child Benefit Act 1975 increases in child benefit for first children will be taken into account for unemployment and sickness benefit purposes, but that increases in child benefit in respect of second and subsequent children will not be taken into account.'
That is what we are talking about. The Minister for Social Security replied:
I can confirm that the rates of child benefit which will apply from April 1977 will require the allowances paid for first children, with unemployment or sickness benefit, to be reduced—by the amount of child benefit—but not those for second and subsequent children."—[Official Report, 8th November 1976; Vol. 919, c. 58.]
That is exactly what is happening, and, according to the logic, purposes and intent of the scheme, it is exactly what should happen.
I understand the hon. Lady's intention in the amendment, but the effect is not to try to give a special allowance for categories of parents with national insurance children's benefit at a huge range of different rates. That is one thing to which one hopes that the child benefit scheme will ultimately bring some sense.

Mr. George Cunningham: Is the right hon. Member being completely logical about this? Surely at first, if child benefit is being paid only to such an extent as it is wholly financed by reduction in tax allowances, there is a case for saying that the child benefit ought not to be offset by a reduction in other benefits, even if, when we have gone the whole way the incidence of child benefit ought entirely to replace those other benefits.

Mr. Jenkin: Perhaps I should not have given way to the hon. Member, because I was coming to that point. What the Government are doing—and they may have been a little coy about it—is to meet the case that the Chancellor described last November when he said this

was causing great concern among large numbers of people.
This is the problem, which has been referred to frequently since the Ashfield by-election, of people finding themselves better off out of work than in work. The Government are taking one small step to put that right. We are giving additional child benefit to families who are in work and making sure that it does not accrue, for whatever reason, to those who are out of work.
If people are in receipt of taxable benefit when they are out of work, they do not end up by being worse off, but there are certain categories of people who get benefit which is not taxable, who are in receipt of sickness, unemployment, and invalidity benefit. Those benefits are not taxable. What will happen with those people is that, after having been unemployed for part of a year—unemployed or sick for two or three months—they will have enough income to absorb the full child benefit tax allowances and, therefore, will suffer the effect of the reduction of child tax allowance pound for pound. They would have been 30p a week better off, but if they are off work sick and have some other benefit set off pound for pound by child addition in national insurance schemes they will suffer a reduction. There is no answer to that. There will come a point where there is a cross-over, and the double deduction will mean cancelling the extra 30p when they are in work.
I think that that is the logic of the scheme, but we need to know whether it is what the Government intend. It means that they are not responding to the deep public concern about people who are better off out of work. One could make a long speech on that subject alone. My hon. Friend the Member for Norfolk, North (Mr. Howell) has pursued it with a tenacity that hon. Members on both sides of the House must admire, whatever they think of the case—and I think that it is very strong. The problem is now widely recognised to exist and is causing great concern.
The Government are now meeting the problem, but not in the way that would make real sense by making sure that all national insurance benefits were brought within the tax net. They are reducing the net income of those who are out of


work and who draw benefits which are not taxable.

Dr. McDonald: The right hon. Gentleman's remarks are interesting but have nothing to do with the amendment, which is concerned not with unemployment benefit or sickness benefit but with the list of benefits in subsection (4). The point of the amendment is to exclude all the child allowance portion of those benefits from taxation. It has nothing to do with child benefit either. I suggest that the right hon. Gentleman keeps the rest of his remarks for debate on the clause.

Mr. Jenkin: The hon. Lady must allow me to make my own speech. I am pointing out that what the Tribune Group is trying to do through the amendment of the hon. Member for Coventry, South-West is contrary to the whole concept and purpose of the child benefit scheme. The Under-Secretary of State for Health and Social Security, who follows these matters with great perspicacity, will not have been surprised at my saying that the Government are meeting a case put with great force by my hon. Friend the Member for Norfolk, North, who has been subject to much abuse because of it, and by many of my right hon. and hon. Friends, that there are large numbers of people who find themselves better off out of work or who suffer so little detriment that they feel that the incentive to work has largely disappeared. The Chairman of the Supplementary Benefits Commission thought that the figure was one in 10, but, to judge from the interviews with them, the voters of Ashfield recognised that it was much higher.
I have paid tribute to the Government for meeting the problem, but they are not doing it in the most humane way. They are reducing the net income of those who are receiving untaxed national insurance benefit—sickness benefit, unemployment benefit and invalidity benefit. If that is not the Government's intention, they will presumably want to put the matter right. Incidentally, I am glad to see that the Secretary of State for Social Services is here.
The question of the means-tested benefits is perhaps outside the scope of the amendment, but I should like to say that I have received from the Minister for

Social Security a letter in which he assured me:
We fully accept the principle that the improvement of universal benefits should reduce dependence on means-tested benefits.
But exactly the same applies to the national insurance benefits, the dependency benefits for children. What is happening is intended, no doubt, to go some way—not far, but a small first step—to redress the balance, so that those in work will have the advantage of child benefit for the addition and it will not accrue to those out of work. But the consequence is that if their benefit when out of work is not taxable they can suffer the deduction twice. The double deduction may not merely offset the 30p extra, which depends on the ratio of the number of weeks in and out of work, but may go beyond it, and they may end up worse off over the year.
That seems to me to be the position that stems from the two subsections and at any rate part of the point raised in the amendment. I can only advise my right hon. and hon. Friends that, admirable though the intention of the amendment may be to try to do something to help widows, it is not the right way or the right vehicle. Therefore, it would not be right for us to support it. I should like to know whether I have correctly spelt out the Government's intention in relation to the difference in the treatment of dependency benefit and child benefit when somebody is in work.

Mr. Robert Sheldon: My hon. Friend the Member for Coventry, South-West (Mrs. Wise) gave a warm welcome to the introduction of child benefit. I think that she echoed in that welcome the feelings of most people concerned.
The complexities to which my hon. Friend referred arise essentially from two basic causes. First, we are trying to bring about a change from a tax allowance to a benefit. Secondly, there is the question of phasing. At each stage, as we move from tax allowance to benefit and as we try to phase this over a period of years, we must try to ensure that nobody loses and that, to put in a small Treasury point, it does not cost too much. Clearly these are problems.
When I refer to its not costing too much, I mean not costing too much as a necessary consequence of a change in


the structure rather than a Cabinet decision, which can be taken at any time, to increase the sums made available to those in need. That is a different matter. Those are the reasons for the complexities.
The amendment seeks to exempt from tax the taxable dependency allowance for dependent children of widows and others. My hon. Friend gave a detailed description of those concerned—widows, retirement pensioners and others. Therefore, I need not go over that in more detail.
I should point out one matter which my hon. Friend certainly understands and which I am sure the Committee will accept. The benefit is only for those who have sufficient income to take advantage of the tax changes. The child tax allowance did not give assistance to those who did not have sufficient taxable income against which to offset the allowance.
A number of my hon. Friends felt that it was wrong that there should be an artificial distinction between allowances and benefits which meant that those who had as much need as others were unable to take advantage of allowances because their income was insufficient. We sought to remedy what we felt to be wrong. Unfortunately, for the reasons that I have given, the result has been the complexities that we see in this clause.

Mrs. Wise: Does my right hon. Friend accept that the amendment refers not to child tax allowances but to making certain tax-free payments for children, which is a different matter? For example, whereas he wants to make £1 of the £6·45 paid as guardian's allowance tax-free, I want to make the whole amount tax-free. That is not the same as a reintroduction of the child tax allowance.

Mr. Sheldon: I understand the point made by my hon. Friend. I was trying to establish the purpose behind the move towards child benefits. If we can establish the purpose behind it, we can see how successful we have been in meeting this purpose and how far we might wish to deviate from the original intention. That is why I mentioned at the outset the intention of the scheme.
11.15 p.m. 
The intention was not to try to achieve a larger benefit, since that could be done

through the social security system. We were trying to achieve a move to child benefit from tax allowances to help those whose income is not sufficient for them to benefit from the child tax allowances. We have been able to meet that objective in the complicated manner that I have described.
We have had the particular problem of widows. That problem arises because for the ordinary taxpayer in receipt of family allowances there was a clawback provision. In the case of the allowance for dependent children there was no claw-back. We had to introduce the changes proposed in Clause 21 so that these families would be no worse off. It was never the intention to make them better off.
I understand my hon. Friends seeking an opportunity to say that these families should be better off. But I am relating the issue to the original intention of child benefit. If my hon. Friends feel that the benefits available under the social security system are inadequate, they are right to press the Department of Health and Social Security for increased benefits. These matters will arise again. I do not need to instruct my hon. Friends about how they should proceed.
This was simply a matter of changing the child tax allowance to child benefit to ensure that people with insufficient income to gain benefit from child tax allowance received that benefit and were not made worse off as a result.

Mr. Ovenden: I repeat the question that I asked in a previous intervention. Is there any justification for making two-parent families on the standard rate of tax better off and widows no better off? Why should they not be 30p a week better off like two-parent families?

Mr. Sheldon: The answer lies in a complex series of arithmetical calculations. It is an administrative problem. It is not a major problem, and it can be remedied by other means, but not in this way.
I understand why hon. Members bring to these debates a number of matters which would normally be discussed in a debate on social security, but such debates do not occur as frequently as Finance Bill debates. I understand that there are not many opportunities for raising such issues. Many arguments find their way into Finance Bill debates.

Mr. MacGregor: I accept the right hon. Gentleman's remarks and I understand that the purpose of the clause is to ensure that widows and others are not worse off as a result of the introduction of child benefit. But we are offering the Financial Secretary a simple and easy way of ensuring that widows and others are better off without waiting for a social security debate.

Mr. Sheldon: The difficulty about that is that it would not be simple, because, unfortunately, the system is not simple. Apart from the not inconsiderable moneys involved, there is the problem of the next stage of the phasing operations. This proposal would make it more difficult to carry out the final phases in the move towards a full child benefit system which we all wish to see.
My hon. Friends are anxious to bring about certain social security changes, and they are importing those arguments into this very limited debate. I feel that the remedy for this lies elsewhere. We have met the aims which the Government set out to achieve in the change from child tax allowances to child benefit, and, despite the complexities, that is the right way to proceed.

Mr. Patrick Jenkin: The Financial Secretary has said that this is inherent in the scheme. Will this be the pattern in subsequent stages of the child benefit? Will he say something about the double deduction because of the reduction in the child tax allowance?

Mr. Sheldon: The right hon. Member should also await a debate on social security before bringing these matters forward. In the transition from child tax allowances to child benefit, the exact nature of the next stage has yet to be settled, but when it is settled the House will be informed.

Mr. George Cunningham: With the greatest respect to the Financial Secretary, I do not think that in future we can rely on separate discussions on social security matters and personal income tax matters. The two are so inextricably intertwined, and will be so for at least the next five years, that the House must find sensible ways—although the House never does this—to discuss these subjects at the same time and with the same people taking part, preferably upstairs and not on the Floor of the House.

Mrs. Wise: My right hon. Friend said that the purpose we seek to accomplish in the amendment would be better done by changes in the rates of benefit. I believe that there is a good case for making these particular payments tax-free, but for the sake of argument I shall accept for the moment the Financial Secretary's statement that we should do it by increasing benefits. If he had said that the Government intend to increase benefits by the equivalent amount of that in my amendment, I would have accepted his method. But he is not saying that. He is telling me to do something that I have learnt in my three years in the House that it is not possible to do. I am not convinced by his remarks.
If the Government provide the means of ensuring the kind of result that we are seeking, we shall take advantage of it. If they do not, we must try to find whatever means we can. Slowly and painfully we are learning that some means exist.
It ill becomes the Treasury to try to put the whole responsibility for this kind of thing on the Department of Health and Social Security. It is my conviction that the efforts that the DHSS would make in this direction are constantly and consistently thwarted by the Treasury. Therefore, we are justified in placing the responsibility quite firmly on the backs of the Treasury. It thwarts other efforts, so it should deal directly with the problems. Let the Treasury grapple with the efforts to help widows and retired people. It must not simply say that this is a problem for the Secretary of State for Social Services.
This has nothing to do with the child benefit scheme as such or with the phasing out of child tax allowances. We agree with the phasing out of the allowances. The amendment is about making certain payments in respect of children tax-free.

Mr. Newton: I have a lot of sympathy with the hon. Lady, but I have now departed from her. She says that the amendment has nothing to do with child benefit, but the practical effect of creating tax-free income for these categories is exactly the same as a tax allowance. So far as the dependency allowances are the same for the different categories, this proposal would be exactly the same as a tax allowance, equivalent to the value of the


dependency allowances or to a flat-rate tax allowance. So far as the dependency allowance is varied, the tax allowance will be different for one category or another. But the practical effect of granting a slice of tax-free income is identical with that of a tax allowance.
I cannot understand why, instead of operating in this complex way, the hon. Lady does not operate on Clause 20(2), under which additional relief is given to widows and others in respect of children—a straightforward tax allowance for the group she is trying to help. Surely it is better to operate by way of a tax allowance which Ministers proposed to increase.

Mrs. Wise: We are dealing with Clause 21, and if I sought to introduce an amendment relating to Clause 20 I should be ruled out of order. That is a good reason for proceeding on the basis of this amendment, which is in order.
This proposal is not the same as providing a child tax allowance, because it is related not to the existence of children and parents in general but to the existence of particular categories with special problems. That is different from the original purpose of child tax allowances.
The Government are seeking to make £1 of the widowed mother's allowance, the guardian's allowance and the industrial death benefit tax-free. I am seeking to make the whole of it—which in most cases means £6·45—tax-free. That would directly benefit people with children and with these special problems. They are old, they are widows, or they are invalids. This is worth while. It is unlikely to be done by other means, and the Government do not offer any other means. They say "Do not put pressure on us now. Put pressure on us in some other way at some other time." I believe that these people need some help now.
We have exposed the Opposition's inability to grasp complex matters and their refusal to be particularly interested in these matters when it comes to the crunch. But I have not been looking for their support. That is their decision. The amendment is worth while, it will help those who need help, and I urge my hon. Friends to support it.

11.30 p.m.

Mr. Newton: I apologise for intervening at this stage, but I do not apologise too much because it is clear that hon.

Members on the Government side of the Committee who intend to vote for the amendment have not fully appreciated what they are doing. I do not want to labour the point except to say to the hon. Member for Coventry, South-West (Mrs. Wise) that if a child dependency allowance is £2 a week—I take the figure out of the air—or £104 a year, the effect of exempting it from tax is the same as granting that same person a child tax allowance of £104 a year.
To that extent, if what the hon. Member wants to do is to help widows and other single parents there is no doubt—and it is she who has not grasped the point—that it would be simpler to increase the existing tax allowance for widows and others in respect of children—not tax allowances generally, but the allowances we have specifically directed to those about whom the hon. Lady is talking.
The fundamental objection to either of these courses, which we would normally hear from the Labour Benches and which we have heard from the Minister, is that they help only those who pay tax. I do not have any objection to that, although clearly it is not much help to many single-parent families. What the hon. Lady is asking her hon. Friends to vote for is a method of helping single-parent families who are better off than the average, those who are paying enough tax—[Interruption.] It is clear that the hon. Lady and her hon. Friends do not understand what is being proposed. It is that additional benefits should be given to those whose incomes are large enough to pay sufficient tax so that if they receive some of the income tax-free they save money. By definition, any family not earning enough income to pay tax will not benefit from what the hon. Lady proposes.

Mrs. Wise: Bearing in mind what the hon. Member and his hon. Friends are always telling us about the low level of pay at which tax bites, I am surprised that he is not grapsing the point. A one-parent family of only one child can start paying tax on earnings of about £26 a week. I do not consider that that is a family too well off to be worthy of consideration.

Mr. Newton: I agree. The point is that these families are already getting the additional tax allowance proposed in the previous clause. To that extent they are


already well below the tax threshold if their income is as low as the hon. Lady suggests. What she cannot get away from is a matter of pure logic. It is an argument we have heard often enough from her hon. Friends, namely, that in trying to help people by tax-free income or tax allowances, we are helping those who are comparatively better off.
In certain contexts that is a reasonable thing to do. But we are not talking about the argument from an incentive point of view. We are talking about helping the less well off. Labour Members appear to think that those of us who attach importance to the arguments about incentive are necessarily excluded from worrying about the less well off. It is

one of their myths about the Conservatives. At the moment we are not talking about the taxation argument, which is totally different. We are talking about how to help the less well off. The hon. Lady's proposition is not sensibly directed to that end. If what she wants to do is to help those who are paying significant amounts of tax, she could find simpler ways of doing it. She has fallen between two stools, and she would do better not to take too many of her hon. Friends into the Lobby to make fools of themselves with her.

Question put, That the amendment be made:—

The Committee divided: Ayes 41, Noes 129.

Division No. 132]
AYES
[11.35 p.m.


Allaun, Frank
Kinnock, Neil
Selby, Harry


Atkinson, Norman
Lamble, David
Skinner, Dennis


Beith, A. J.
Latham, Arthur (Paddington)
Smith, Cyril (Rochdale)


Bennett, Andrew (Stockport N)
Lestor, Miss Joan (Eton and Slough)
Spearing, Nigel


Bidwell, Sydney
Loyden, Eddie
Thomas, Ron (Bristol NW)


Canavan, Dennis
MacCormick, Iain
Thorne, Stan (Preston South)


Cook, Robin F. (Edin C)
Madden, Max
Thorpe, Rt Hon Jeremy (N Devon)


Crawlord, Douglas
Maynard, Miss Joan
Watkins, David


Evans, Ioan (Aberdare)
Mendelson, John
Wigley, Dafydd


Flannery, Martin
Miller, Dr M. S. (E Kilbride)
Wilson, Gordon (Dundee E)


Grimond, Rt Non J.
Newens, Stanley
Wise, Mrs Audrey


Hooley, Frank
Penhaligon, David



Hoyle, Doug (Nelson)
Richardson, Miss Jo
TELLERS FOR THE AYES:


Kerr, Russell
Rodgers, George (Chorley)
Dr. Oonagh McDonald and


Kilroy-Silk, Robert
Rooker, J. W.
Mr. John Ovenden.




NOES


Archer, Peter
Dunnett, Jack
Lyons, Edward (Bradford W)


Armstrong, Ernest
Eadie, Alex
Mabon, Rt Hon Dr J. Dickson


Ashton, Joe
Ennals, David
McCartney, Hugh


Bates, Alf
Ewing, Harry (Stirling)
McElhone, Frank


Bean, R. E.
Foot, Rt Hon Michael
MacFarquhar, Roderick


Bishop, E. S.
Fowler, Gerald (The Wrekin)
MacKenzie, Gregor


Bienkinsop, Arthur
Fraser, John (Lambeth, N'w'd)
McMillan, Tom (Glasgow C)


Booth, Rt Hon Albert
Freeson, Reginald
Mahon, Simon


Boothroyd, Miss Betty
Gilbert, Dr John
Mallalieu, J.P.W.


Brown, Hugh D. (Provan)
Golding, John
Marks, Kenneth


Buchan, Norman
Gourlay, Harry
Meacher, Michael


Buchanan, Richard
Graham, Ted
Millan, Rt Hon Bruce


Callaghan, Jim (Middleton &amp; P)
Grant, George (Morpeth)
Mitchell, Austin Vernon (Grimsby)


Campbell, Ian
Grant, John (Islington C)
Moonman, Eric


Cant, R. B.
Hamilton, James (Bothwell)
Morris, Alfred (Wythenshawe)


Carmichael, Neil
Harper, Joseph
Morris, Charles R. (Oponshaw)


Castle, Rt Hon Barbara
Karrison, Walter (Wakefield)
Morris, Rt Hon J. (Aberavon)


Cocks, Rt Hon Michael
Katton, Frank
Moyle, Roland


Cohen, Stanley
Horam, John
Murray, Rt Hon Ronald King


Coleman, Donald
Howell, Rt Hon Denis (B'ham, Sm H)
Noble, Mike


Conlan, Bernard
Hughes, Robert (Aberdeen N)
Oakes, Gordon


Cowans, Harry
Hunter, Adam
Ogden, Eric


Cox, Thomas (Tooting)
Irvine, Rt Hon Sir A. (Edge Hill)
Orme, Rt Hon Stanley


Crawshaw, Richard
Irving, Rt Hon S. (Dartford)
Palmer, Arthur


Crowther, Stan (Rotherham)
Jackson, Colin (Brighouse)
Pavitt, Laurie


Cunningham, G. (Islington S)
Jackson, Miss Margaret (Lincoln)
Pendry, Tom


Davidson, Arthur
John, Brynmor
Radice, Giles


Davies, Denzil (Llanelli)
Johnson, James (Hull West)
Rees, Rt Hon Merlyn (Leeds S)


Davis, Clinton (Hackney C)
Jones, Alec (Rhondda)
Robinson, Geoffrey


Deakins, Eric
Jones, Barry (East Flint)
Ross, Rt Hon W. (Kilmarnock)


Dean, Joseph (Leeds West)
Kaufman, Gerald
Rowlands, Ted


Dell, Rt Hon Edmund
Kerr, Russell
Sheldon, Rt Hon Robert


Dempsey, James
Lamborn, Harry
Shore, Rt Hon Peter


Doiġ, Peter
Lewis, Ron (Carlisle)
Silkin, Rt Hon S. C. (Dulwich)


Douglas-Mann, Bruce
Luard, Evan
Silverman, Julius


Dunn, James A.
Lyon, Alexander (York)
Small, William




Smith, John (N Lanarkshire)
Walker, Terry (Kingswood)
Woodall, Alec


Snape, Peter
Ward, Michael
Woof, Robert


Spriggs, Leslie
White, Frank R. (Bury)
Wrigglesworth, Ian


Stallard, A. W.
White, James (Pollok)
Young, David (Bolton E)


Stewart, Rt Hon M. (Fulham)
Whitlock, William



Strang, Gavin
Williams, Rt Hon Alan (Swansea W)
TELLERS FOR THE NOES:


Thomas, Jeffrey (Abertillery)
Wilson, Alexander (Hamilton)
Miss Ann Taylor and


Thomas, Mike (Newcastle E)
Wilson, William (Coventry SE)
Mr. David Stoddart.


Tinn, James

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

11.45 p.m.

Mr. Patrick Jenkin: Clause 21 is the key provision in the structure of the child benefit scheme because this provision reverses the relevant provisions of last year's Finance Bill and makes the child benefit a tax-free benefit. It is the heart of the tax credit principle first put forward by the Conservative Government in their Green Paper on tax credits. Because it occupies such a key position in that structure, a debate on Clause 21 is in reality a debate about the principle of the child benefit scheme—and child benefit relates to tax credits for children.
There are consequential matters contained in Clause 22 dealing with the reduction of child tax allowances, in Clause 23 which deals with children overseas, and in Clause 24 which deals with students which will be dealt with in Committee upstairs. We are debating Clause 21 on the Floor because it is the provision that sets out the principle of the child benefit scheme—namely, that it is a tax-free payment to mothers for children. The Chair has indicated that a fairly general debate on the child benefit scheme and references going beyond freedom from tax would not be out of order.
It is right to remind the Committee that a tax-free payment was always envisaged, certainly at the time of the Green Paper and at the time of the Child Benefit Act. That legislation was taken through the House by the right hon. Lady the Member for Blackburn (Mrs. Castle), who I am glad to see present for this debate. It was only the Cabinet's surrender to the male chauvinists in the Labour Party a year ago, when it was decided to abandon child benefit, that upset that principle.
It is worth pointing out that the pamphlet "The Great Child Benefit Robbery"

sets out a detailed analysis of the rôle played over the years by the Prime Minister in his attitudes to family support. It is clear from quotations from the Cross-man diaries that the Prime Minister has never understood or accepted the case for a tax-free cash payment to mothers. The pamphlet points out that a so-called survey of Back-Bench opinion was in fact a survey of Government Whips, and it states:
A feminist backbencher has since said that if you asked the Whips today about votes for women they would no doubt be against it".
The Prime Minister was against the child benefit scheme and, therefore, last May that scheme was abandoned and child benefits were then said to be simply a taxable extension of family allowances.
Amendments were tabled to last year's Finance Bill at a late stage to change the whole pattern of what was envisaged at an earlier stage. [Interruption.] The Minister for Social Security says that the scheme was not abandoned. He will no doubt agree, that the tax-free cash payment, which he calls the central pillar of the Government's system of family support, was abandoned last May. From that dismal surrender has flowed all the trouble.

The Minister for Social Security (Mr. Stanley Orme): The right hon. Gentleman may say that it was abandoned in May, but when the working party was set up and the phasing-in started the child benefit was introduced.

Mr. Jenkin: The Minister anticipates almost my next words. He is now conceding that last May it was abandoned, and he is trying to say that some attempt to recover the position was made later in the year.
I shall not list the long sad saga of order, counter-order and disorder that followed the surrender of last May. I am sure that hon. Members in all parts of the Committee have been made fully aware by their constituents of the confusion which has ensued.
Let me restate briefly the Conservative view of what the Government should have done. I spelt it out in the debate on 28th June last. They should have introduced the child benefit not at £1 a week but at £2-plus, and the figure is probably £2·34 as the precise equivalent of the under-11 child tax allowance. They should have paid the 30p premium for third and subsequent children. They should have eliminated the child tax allowance at the under-11 level, retained the child tax allowance over 11 where that exceeded the under-11 rate, and retained the full child tax allowance for rates of tax in excess of 35 per cent., so that someone paying 40 per cent. would get relief at 5 per cent., and so on.
That would have produced five clear advantages. It would have given real help, not just 30p a week, to the working poor. It would have cased the soul-destroying impact of the poverty trap. It would have reduced the imbalance between those in work and those out of work. It would have given real help to those one-parent families in work; and it would have switched resources substantially from the wallet to the purse. It would not have left anyone worse off, except perhaps a few very wealthy families, and I concede that it would not have have given 30p to standard rate taxpaying families. The right hon. Member for Blackburn, however, had left the Government's cupboard in the Social Security Department so bare that there were no resources for a general improvement in family support. I spelt out last June what could and what should have been done, but it was not done and that is a matter of great regret.
I recognise that it cannot now be done for 1977–78, and we are now stuck with Clause 21 and the other consequential clauses. But I must state clearly without any "ifs" and "buts" that it will be our intention, when we win the next General Election, to introduce a full child benefit as soon as it is practicable as the first stage of phasing in a tax credit scheme. For the present we must face the consequences of last May's "surrender to chauvinism", to quote the right hon. Lady, plus last September's belated attempt to recover the position.
In September the Government changed tack yet again. The child benefit was

now not to be taxed, as this clause achieves that objective. There was to be no clawback—that is to go too. The child tax allowances were not to be left as had been earlier proposed but were now to be reduced. The result of that dramatic change of direction has been to produce the shambles which is now widely acknowledged.
Officials in the Inland Revenue, the Department of Health and Social Security and the Post Office—three giant Departments—have struggled manfully to perform the miracles that they have carried out to get the scheme as far ahead as it is. They have done it against all odds. The fault that the matter has been so mishandled rests squarely with Ministers who have forced these huge Departments to grapple with radical changes of policy and who have allowed totally inadequate time for the Departments to react to them in the sensible and measured way in which administration should be carried out.
The measure of the difficulties that those Departments have faced becomes clear from an answer I received from the Minister for Social Security to a Question I tabled immediately after the Budget. I asked the Secretary of State for Social Services
if he will list successive changes of Government policy on child benefit and consequential arrangements since the Child Benefit Act became law."—[Official Report, 14th April 1977; Vol. 930, c. 62.]
From the Minister's answer one can identify no fewer than 11 distinct and separate changes in policy that have taken place since the Act became law.
The story started with the decision on 25th May 1976 to make the child benefit a taxable allowance, and last year's Finance Bill did just that. This clause is intended to reverse that. The story ended with the special transitional arrangements for students that were announced on 29th March 1977. There have been 11 separate changes in policy. I shall not list them all. They can all be seen in Hansard. I referred to 23rd September 1976 and the announcements by the Chief Secretary. Three of them were special changes in FIS. There was an announcement about the effect on free school meals and about the effect on students, as well as the new student arrangements announced on 28th March


and the full child tax allowance for students aged over 19, coupled with the benefit from increases in parental contributions.
There have been 11 separate changes of policy during the course of the year. How on earth people are expected to grapple with that is past understanding. In fact, they have not been able to do so. Practically nobody outside the House can begin to understand how the child benefit scheme now works and its effects. What is much more serious, however, is the position of the staffs of the Post Office, the Inland Revenue and the DHSS who must grapple with these changes. One asks how they are expected to cope, and the answer is that they cannot and are not doing so. In the eyes of these staff, the child benefit scheme has become a bad joke. However, it was the fault of Ministers and not of the staff. It is entirely the fault of the Treasury Bench. These staffs are the victims of the Government's ineptitude.

Mr. Orme: I should like to inform the right hon. Gentleman and the Committee that the flow-back to the Department about the operation of the scheme indicates that its coming into operation has been far more even than the right hon. Gentleman has given it credit for.

Mr. Jenkin: If that is so I am glad to hear it, but is it really suggested that this is a sensible way to administer a major change in tax and social policy—to dribble out a whole series of decisions with the last one being announced only five days before the scheme is due to begin? Do the Government regard that as sensible administration? Of course it is not. Two major changes of tack in the course of one year have resulted in the chaotic introduction of the scheme. One-child families would receive tax-free benefit under the clause, but how many hundreds of thousands of such families have not yet claimed child benefit tax-free? If the child tax allowances are cut, such families will realise that they are losing out, and presumably they will then claim quickly.
But what of the single parent in part-time employment who is below the tax threshold and who stands to gain most because there is no child tax allowance to be cut?
We know that the outturn of the child interim benefit was 10 per cent. below what was estimated—£19 million against £21 million. One family in 10 did not claim CHIB before the end of the year. What steps are the Government taking to reach the families who have not yet claimed child benefit and will not get the benefit of Clause 21?
12 midnight.
In a telling speech on Second Reading of the Finance Bill, the right hon. Member for Blackburn said that it was a disaster that no part of the tax cuts in the Budget would go to families with children. She referred to
the major flaw in the Budget
and
serious flaw in the Bill".—[Official Report, 28th April 1977; Vol. 930, c. 1530.]
I do not often agree with the right hon. Lady, and I hope that she will not consider it an insult if I agree with her on this occasion. The right hon. Lady was right. She and I support the concept of the full child benefit. I was at the Treasury when the scheme was invented, and the right hon. Lady piloted the Child Benefit Bill through the House and gave it flesh and blood. Neither of us envisaged that the introduction of the scheme would make it impossible for the Government to switch resources to the family when taxes were being cut. This has happened, and we must ask whether it is an inevitable consequence of this form of child benefit.
My wife's child benefit book provides for a benefit of £2·50 a week until next April. when my youngest child but one reaches the age of 19. After that, there will be £1 a week for the remaining child under 19. But that goes through to May next year.
We were told at Question Time today that it was intended to increase the benefit not in November but in the next Budget. One of the arguments canvassed before the Select Committee was that benefit payments should appear in the books as units that could be given different values by a relatively simple administrative step. For example, up to a certain date the units would be worth, say, 50p and after that 60p—a 20 per cent. increase that could be achieved with the minimum of trouble. There would be no question of changing the books. The vouchers are


already dated and post office staff would have to check only the date. That is a simple way of providing tax-free increases.
What are the objections to such a scheme? We were told in the joint study of the Labour Party and the TUC which considered whether the rates of chid benefit should be changed from April that
There would be severe operational difficulties. As far as DHSS is concerned, the order hooks have already been printed at the £1/£1·50 rate and would all (about seven million have to be overstamped. This would involve staff costs of well over £1 million. It would inevitably result in confusion for staff and public alike, at a high administrative cost, for no net gain to families. And there is a real risk of breakdown with people being without order books for the proper amount, and even without orders books at all, for some weeks.
Much of this seems to be happening already. Although this was forecast, it could be avoided if we had books of units. I do not understand why this cannot be done. The Government must examine the matter, especially in light of the administrative savings.
Then there is the argument that this would mean more public expense. This raises the question of whether a tax-free payment, such as this is under Clause 21, is public expenditure or whether it should be regarded as a deduction from tax in the way that tax allowances are now regarded. Is that one of the probems that the Government are facing with this question of varying the rate? I cannot believe that it need be.
In the public expenditure White Paper—

Mr. George Cunningham: It is a Blue Book. It should be called a Blue Paper.

Mr. Jenkin: The hon. Gentleman is always anxious to rewrite the rules of the House. If he wants to call it a Blue Book I shall not complain, but we know it as the public expenditure White Paper.
What the Government did—this was commented on favourably by the Sub-Committee of the Expenditure Committee—was to show the gross child benefit paid and then the deduction of the reduction in child allowance. The Government said in paragraph 7 of the White Paper:
it is this net cost which is included in the programme totals".

I say that that is a sensible way of looking at it, but it means that the net cost is still regarded as public expenditure. It replaces tax allowances, and tax allowances and tax credits have the same ecomic effect, almost however one looks at it. That is why the Americans talk about tax expenditure. One wonders whether this is not the right way of dealing with it.
My third question to the Financial Secretary is this. When will this child benefit be increased? We were told this afternoon that it would not be in November, and there is a suggestion that it might be increased next April. Will it be increased only by the amount of the reduction in the tax allowance, or will there be a real increase in value in this tax-free child benefit under Clause 21?
In the Second Reading debate, the right hon. Member for Blackburn said:
I am alarmed because by then
the right hon. Lady meant by November, but she will be even more alarmed in April—
it will be administratively too late to increase child benefit. If the Chancellor comes along with more tax reliefs in the autumn, under the formula of the Bill we shall be compelled to leave the children out."—[Official Report, 28th April 1977; Vol. 930, c. 1532.]
That is what is to happen. There is now no intention of increasing child tax benefit although the £1 or £1·50 was fixed a year ago, in May 1976, and it will be April 1978 before there is any question of increasing it.
I think that this gets us into a difficult situation indeed. The Government can increase the tax allowance without reference to the Contingency Reserve, but they cannot increase child benefits because that is a charge on the Contingency Reserve and it cannot be done. If that is so, are not we in an absurd situation?
The economic effect of an increase in tax allowance and an increase in child benefit is the same. If the limiting factor is the size of the public sector borrowing requirement—and that is the central feature of the IMF Letter of Intent—whether it is a tax cut or an increase in child benefit, in either case it puts more cash into the hands of the taxpayer. I must ask the Financial Secretary to spell out exactly how the Government see this. What are the administrative constraints?


Is it a question of the printing of booklets, or is it a question of the economic classification of public expenditure limits?
There is a fourth question that arises out of this tax-free child benefit under the clause. Do the Government accept the proposition that over a prolonged period families with children have fallen back relative to families without children? Do they accept that there is a need to redress the balance? Many studies have exposed this trend. I mention only two. First there is the CPAG—the Child Poverty Action Group—Budget memorandum in which tables show that family allowances in 1976–77 were half their real value of 30 years earlier. Another study which has come into my hands is that of the Outer Circle Policy Group. It showed the relativities of child tax allowance to single and married allowances and went back to before the war. It showed that child tax allowances had relatively been sharply reduced.
Incidentally, that report also shows that child tax allowances, expressed as a percentage of the single person's tax allowance, tended to increase under Tory Chancellors but to reduce under Labour Chancellors.
When one looks at the combined figure of family and child allowances, one sees a steady decline over the years with benefits going to families with children, in relation to the single and the married couples. The CPAG's conclusion is that
support to children whose parents are working has been steadily eroded.
When this is combined with the effect of the disastrous lowering of tax thresholds in real terms over the last three years, Ashfield begins to fall into place. One point that my hon. Friend the Member for Ashfield (Mr. Smith) made throughout his campaign was that people were paying too much tax. The electorate agreed with him, and he won.
But there is another effect. I come to the matter on which I was invited by the Financial Secretary to put my points on the Question "That the clause stand part of the Bill": the relative position of those in work and those out of work. I know that the Financial Secretary took it on board when I said it before, so I shall be brief.
The effect of what is being done in this clause, making the child benefit

tax-free, is to ensure that there is an advantage to the poor family when in work. Under the Government's scheme, the advantage is 30p to all families and £1 to poor families per week. There is no comparable advantage to those on national insurance and social security benefit. I have accepted that that is right and in accordance with the principle of redressing the balance between those in work and those out of work. It is a small step but nevertheless a step in the right direction.
If one looks at it in relation to short-term benefits for unemployment, sickness and invalidity, these are tax-free and the effect is that there will be duplication of detriment. The double detriment is because tax allowance is reduced and child benefit takes its place with 30p extra a week. But once the family goes out of work and becomes unemployed or sick, the child benefit is set, again, against their dependancy allowance under the social security scheme. At some point the detriment of double deduction will offset the advantage of the extra 30p received while in work, and those families in the course of a year will end up worse off.
That is one way of redressing the balance between those in work and those out of work. But is it what the Government intend? The right answer, surely, is a full tax credit. That would make the benefits taxable in the way in which long-term benefits are taxable and nobody would be worse off, because the advantages are set off one against the other. This benefit does not help families with students in college now who will end their courses in July. They do not benefit from the reduction in parental contribution which starts next September.
We shall no doubt debate the question of overseas children in Committee upstairs, but the Government's decision to phase out the child tax allowance for children overseas, notwithstanding that they do not get child benefit, is in line with the report of the Select Committee which examined this matter in 1972–73. It said, and I quote paragraph 109
We appreciate that this change in the system will alter very materially the position of those who now claim the allowances in respect of overseas dependants and we should welcome any step which could be taken to mitigate hardship in this field.


It has been postponed for a year. Therefore, the Under-Secretary of State for Health and Social Security says that the word "sharply" used by the Secretary of State in the debate last June is no longer justified. That is a matter of semantics.
The paragraph continues:
We doubt whether allowing tax relief on proof of remittances actually sent abroad would be satisfactory, because the proof of despatch would by no means be proof that the remittance would be bona fide for the benefit of a dependant.
Then there is a key sentence:
But we think that an extension of the covenant system might be further investigated.
Do the Government have it in mind to extend the covenant system so that a covenant for a child overseas could qualify for tax relief as the tax credit Select Committee recommended?
12.15 a.m. 
What would the reaction have been if it had been a Tory Government who reduced the child tax allowances for overseas children? The reaction in the House would have been one of utter hysteria. We should have been accused of racial discrimination, of causing grave hardship to the poorest in the country, of a savage attack on the immigrant community—all of which is said in a letter to me from the Redbridge Community Relations Council.
Yet this is probably the right decision. But the Government must examine the arguments of the Select Committee to see whether there is some way of relieving what might be hardship. We are a responsible Opposition. We see the strength of the case, but we want to know about the covenant scheme.
The clause may represent a significant step on the road to a proper structure of support for families with children, but it is a minuscule step. In the words of the poet Horace,
Parturiuni montes: nascitur ridiculus mus
Although I have been critical of the way in which the child benefit has been introduced, we support the benefit and I do not suggest that we vote against the clause, because it is integral to the scheme. But Ministers continue to make absurd claims for the "ridiculus mus" that they have produced. The Minister for Social

Security, who, I suspect, has left to catch his train, said on 4th April:
the present two systems of support for children, child tax allowances and family allowances, are being replaced by a single tax-free cash benefit".
That is not true. There is only a small first step along that road. He continued:
all the support for children is going where it properly belongs, to the mother
That is not true either. It will not happen for years. The Government are trying to pretend that the scheme is a great deal more important than it is and as it would have been if they had introduced our proposal.
The last word must go to the Secretary of State for Social Services, who went to Washington, County Durham, to praise the merits of the child benefit scheme. He may have said "Ha'way the staff", but he did not have the nerve to say "Ha'way the children", because they get precious little out of it. The clause is a small step and we shall not vote against it, but the Government must know that those who complain of the "Great Child Benefit Robbery" have a great deal of right on their side.

Mrs. Barbara Castle: It was typical of the right hon. Member for Wanstead and Woodford (Mr. Jenkin) that he should spend so much of his speech on resurrecting so many stale mythologies. To listen to him one would have imagined that if there had been a Conservative Government in office we should have had, in April this year, the introduction of a child benefit scheme that would have spread richness, light and joy throughout every family in the country. One would never have imagined that Conservative Governments never increased the family allowance in the whole 13 years they were in office, and certainly never took the step of extending it to the first child.
Let me begin by disposing of some of the mythology. We should be talking about the need to increase family support. The child benefit scheme which the right hon. Member for Wanstead and Woodford told the Committee the Conservative Government would have introduced, had they still been in office, would not have done that. When the Government announced the postponement of the scheme the right hon. Gentleman argued,


as he has argued again today, that we could have had the child benefit scheme without any additional cost at a rate of £2—

Mr. Patrick Jenkin: Mr. Patrick Jenkin rose—

Mrs. Castle: I do not want to be interrupted at the moment.

Mr. Peter Bottomley: I believe that my right hon. Friend's comments were made when the Government were providing the extra £90 million. That was included in what he was saying. Therefore, the right hon. Lady is not quite correct.

Mrs. Castle: Yes, at no additional cost to what the Government were providing—I know the figures perfectly well—giving a level of child benefit of £2·35 a week.
The right hon. Gentleman then had the audacity and the dishonesty to tell the Committee that it could not be proceeded with because I had left the cupboard bare. But, by his own admission, he was not going to take anything extra out of the cupboard. That was another of his distortions and irrelevancies.

Mr. Patrick Jenkin: There is a lot on which the right hon. Lady and I agree. I have been rough with her and she is entitled to be rough with me, provided that we get it right. I made it clear that in my scheme there would have been no general improvement, but there would have been a big improvement for the children of those at the bottom end of the income scale. They would have got a benefit two or three times larger than has been given and there would have been a corresponding switch from the wallet to the purse. There would have been no general 30p. That is the difference between what we would have done and what the Government have done.

Mrs. Castle: That is the point of difference. I am saying that the Opposition do not believe in an increased level of family support.

Mr. Patrick Jenkin: There is no money for it.

Mrs. Castle: Exactly. That is what he is now saying. Therefore, he cannot say that I left the cupboard bare. The right hon. Gentleman did not believe in any

additional public expenditure. What I did that emptied the cupboard, if that is the phrase that the right hon. Gentleman wants to use, was to increase old-age pensions, which I am sure the Opposition consider was extravagant, and to extend the disablement scheme, about which the hon. Member for Wallasey (Mrs. Chalker) prates. That takes money. The money cannot be there if it has been spent on helping disabled housewives and mobility allowances. That was what emptied the cupboard, again to use the right hon. Gentleman's phrase.
The right hon. Gentleman attempted to justify as highly desirable the introduction of a full child benefit scheme at no additional cost. If he imagines that would have spread enthusiasm throughout the land or got rid of any of the difficulties of the transitional anomalies, he is living in cloud-cuckoo-land.
What we ought to be fighting for tonight, and what I had been fighting for in my speeches quoted by the right hon. Gentleman, is for this country to devote an increased level of its resources to family support. I totally reject the concept that the cupboard was bare. It was always intended that the child benefit scheme should be covered by the contingency reserve which stood at £800 million.
I considered that a minimum level for the full introduction this year of child benefit would be £2·70 per week. That has been variously estimated as costing between £110 million, compared with £94 million and what the Treasury maintains is £180 million. I dispute that figure. Even accepting the Treasury's figure, I maintain that at a time of rising inflation and particularly in a year when there has been such economic overkill that we are having to give money back through tax reliefs it is scandalous to suggest that the cupboard is too bare to find £180 million.
That is the indictment that we should be making tonight. It is also an indictment against the Opposition. If we had a Conservative Government we should not have a child benefit scheme at all, let alone one at the level that I consider to be the minimum required. The evidence is that in the last few years of the Tory Party's conversion to a total abhorrence of public expenditure and to


cut it at all costs, Opposition spokesmen have told us that the tax credit scheme on which they produced a Green Paper would have had to be reviewed.
The Opposition would not have introduced anything like the social improvements introduced by this Government. We know that. May we now dispense with the hypocrisy and turn to what should be done now? Increasing the level of family support is of dominant urgency.
Of course, it is useful to have a child benefit scheme for its own sake, whatever the level, because it extends benefit to those who are too poor to pay tax. But let us realise that we are talking about a tiny minority—about 250,000 families. We should be talking about the 7 million or more children whom we want to benefit and who are going short. They are the new poor in our society.
I regret deeply the postponement of the full introduction of the child benefit scheme. I accept that this is a transitional phase, which creates the type of anomalies that we discussed earlier. But I plead with the Government to recognise that this year they have deliberately refused to introduce a proper child benefit scheme at a reasonable level. At the same time they have given away £1,800 million in tax reliefs, not a penny of which has gone directly to benefit the children who are so much in need.
My right hon. Friend the Financial Secretary said that we must concern ourselves with those who are in greatest need. Those in greatest need today are the families on modest incomes with children to bring up at a time when inflation is continuing at an intolerable level. Out of the £900 million spent on raising the tax threshold in the Budget, only £360 million goes to parents with dependent children. Families with children are becoming relatively poorer in relation to the single person. We spread the available resources so broadly that we have to leave out the children. That is an intolerable situation, which will become doubly intolerable if—as I hopc—we have another reflationary injection of relief and easement of economic and financial stringencies in the autumn.
What are the Government going to do about the family in that situation? I totally reject the idea that it is administratively

too late to increase child benefit this November. I have proof of that. When I expressed anxiety about whether we were running too late administratively to increase the pensions and other benefits in timefor the November uprating, I was told, only this afternoon, by the Secretary of State, that there was no need to worry. He said that there was plenty of time left, and that the middle of June would be a perfectly satisfactory starting date. I hope that he does not have the same trouble with the Civil Service unions that I had through apparently rushing an uprating. This House has until mid-June to decide to increase child benefit in November. We should do it.
12.30 a.m. 
That is what concerns me tonight. I am not concerned with the past—with my disappointment over the delay and the phasing. I am concerned with one thing only—that before it is too late we should increase the level of support for families. I ask my right hon. Friend, in his reply, to repudiate the answer that I received earlier today, when I was told categorically that there would be no increase in child benefit this year—not even as part of the annual uprating. This is what I find intolerable.

Mr. Peter Bottomley: I follow with some pleasure the speech of the right hon. Member for Blackburn (Mrs. Castle), especially the middle and later parts, which were on topics on which we agree.
There are various problems that could easily be considered in this debate on the clause, but I shall take up the right hon. Lady on only one or two issues. She said she wanted to deal with the mythology surrounding these matters. I thing that she created some of her own, or that she was rather selective in her memories.
What a shame that the Labour Government did not introduce the full child benefit scheme in April 1976. I think I would have the right hon. Lady's agreement on that point. It was a great pity that, as Secretary of State in those days, she could not persuade her Cabinet colleagues. Had she done so the scheme would have been in effect and running for more than a year. The uprating would have come—not automatically, because we know how the Treasury Ministers have to deal with the trade unions, and they have a blind spot when it comes to


looking at elements of family support as part of the wage negotiations and bargaining.
It is a shame that all benefits are not put in the Finance Bill for confirmation. That would give Back Benchers like myself the opportunity to attack the problems of increasing child benefit directly without having to mess around with child tax allowances. There is all-party agreement for bringing in child benefit, yet we have a Finance Bill that does not give us the opportunity of looking directly at benefits that are equally a part of Government expenditure as tax allowances or other benefits. The Treasury Ministers should consider this point in future.
The House should support the suggestion of putting units on vouchers for child benefit. One reason why this has not been done in the past is not that the Post Office actually needs to read the sum on the form but to give the Treasury an excuse to delay increasing these benefits, which should be raised in line with inflation in the same way as old-age pensions.
If we have a universal system of old-age pensions and a universal system of family support through child benefit, what is so peculiar about children that we ignore the ravages of inflation on them? How are they different from pensioners? Why does the old-age pension go up automatically while the child benefit does not? Is there some distinction that I have missed in my two years in the House? Or are we supposed to assume that because some families with children are at work, they get extra increases at work because of their family responsibilities?
We know that that is not true. The 8 million old-age pensioners are treated differently from the 14 million children, who are left to muddle through in a fog of inflation, beset by the ravages described by the right hon. Member for Blackburn. Yet the House has so far seen no reason to change. In fact, the right hon. Lady led her colleagues into the Division Lobby against a suggestion that there should be even an annual review of the level of the child benefit. The picture seems to change according to whether one is on the Back Benches or the Front Bench.
However, I think that the right hon. Lady will now agree that it would have been right to have not only an annual review but the automatic uprating, following that review, which we have with old-age pensions. I am not blaming the right hon. Lady for her actions; I am blaming her Cabinet colleagues for not having the foresight, the compassion or even the common humanity to recognise that dependent children should be treated on all fours with pensioners.
It is now 30 years since Eleanor Rathbone won her campaign for family allowances. For those 30 years, we did without a benefit for the first child. We now have it. But in the case of our nearest Common Market partner, France, for an additional child a mother will get £1,000 over two years. In this country she gets less than £100. Are we so down on the family?
Perhaps the reason is the composition of our political parties. The Labour movement is built around the representation of the person at work. In discussions about distributing increased production or incomes policy, do its members discuss with the Government the position of those with family responsibilities? Are they discussing now with the Chancellor and the Secretary of State for Social Services how, in the next stage of incomes policy, the tax-free child benefit can be increased so as to introduce some equity—

The First Deputy Chairman (Sir Myer Galpern): Order. I have only just come into the Chair, but I have begun to wonder where the hon. Member's speech is going. He has been looking at me quizzically and smiling, and he has reason. He is not relating his argument to taxation. The question of the level of child benefit is strictly out of order.

Mr. Bottomley: I am grateful for that guidance—

The First Deputy Chairman: The hon. Gentleman did not require guidance.

Mr. Bottomley: I was smiling because I remembered a jest from the Chair earlier tonight and wondered whether I was going to be treated to another.

The First Deputy Chairman: I make only one per evening.

Mr. Bottomley: I say, "Good morning," to you now, Sir.
If I may try to relate my remarks more closely to the clause, I was alluding to the present discussions, which have a impact on taxation and therefore the level of tax that is not being levied on child benefit. The Government at the moment are apparently ignoring the 14 million children affected by this tax-free child benefit. They seem to ignore the 14 million parents—the 28 million people, or 27½ million if we assume that there are a number of one-parent families.

The Under-Secretary of State for Health and Social Security (Mr. Eric Deakins): The hon. Member's arithmetic is slightly wrong. Some parents have more than one child, and therefore one does not double the number of children to arrive at the number of parents.

Mr. Bottomley: I am grateful to the Minister, but may I draw his attention to the fact that most children have two parents? Therefore it can work out that way. If there are 7 million first children, it suggests that there are roughly 7 million families. If, on average, a child has two parents, that means there are 14 million parents. Seven million first children plus 7 million subsequent children, plus 14 million parents, totals 28 million. I may have got my sums wrong, but it seems to be logical, if we are dealing with this number, that they ought to be given more consideration than we can give in a short debate, which possibly verges on being out of order, early in the morning.
The proceedings on the Finance Bill should make provision for a serious debate on the topic with which the right hon. Member for Blackburn and I are concerned, namely increasing the level of family support. It is time that there was a family movement as effective in terms of its reasoning and logic in presenting a case to Government as the trade union movement, which represents 11 million people out of a working population of 23 million. That is much less than the 28 million people involved here.
When the Minister replies I ask him to tell us whether there is to be a proper increase in child benefit in April next and, if so, what kind of legislation will be introduced to make that possible. When will it come forward—

The First Deputy Chairman: Order. We are not discussing the level of child benefit. I hope that I do not have to repeat that.

Mr. Bottomley: Not only shall we not be able to give help to one-parent families at the level that is, perhaps, higher than the benefit specified in this clause; we shall not be able to increase it properly until we have a child benefit that is substantially higher than it is at the moment, and getting on towards the level in France.
If the Conservatives had come into government after the Child Benefit Act had been enacted and found themselves in the position in which the Labour Government now are there would have been a row that would have lifted the roof off this place—a proper row. I hope that the Government will feel as contrite and as guilty as they ought to and that when they go into opposition—shortly—they will put pressure on a Conservative Government to introduce the sort of family support that is needed.

Mrs. Lynda Chalker: I shall try not to detain the Committee longer than is necessary, but we have had some success tonight, in that this is the first time that we have had a joint meeting of the Treasury and the Department of Health and Social Security teams on this question of child benefit being tax-free. In many of the arguments that have been bandied between the Department of Health and Social Security and the Treasury it has been the Treasury which has been pulling the strings.
I am conscious of the title of this clause. We all recognise that the child benefit should be a benefit as of right and tax-free. We cannot discuss its level at present but we do feel strongly that if we are to have a benefit as of right it should be meaningful, particularly for the lower-paid families and those who come below the tax threshold. They will not benefit to the degree that the right hon. Member for Blackburn (Mrs. Castle) wishes, or to the extent that my right hon. and hon. Friends believe is correct, without a proper child benefit scheme.
12.45 a.m.
I shall not go over the 12-month ever-changing scene described in the parliamentary answer of 19th April. It suffices


to say that in reaching the full tax-free child benefit in three separate stages of reducing the child tax allowance, we are still leaving the general public in considerable confusion. The volume of correspondence received by accountants throughout the country about this tax-free benefit and the reduction of the tax allowances is phenomenal. If the Government have done one thing by the manner in which they have introduced this benefit, it is to give increased work to the accountancy profession. Many have found the instructions, however simplified they may now be, a continuing source of argument and discussion as the various changes have been brought to bear over the past 12 months.
From everyone who has spoken in this short debate we have heard of the plight of families with chidren. However, there is one question that I should like to ask about those student children, if they can be called such, who are over 19.
In a Written Answer on 29th March—columns 111 and 112 of Hansard—the Chief Secretary to the Treasury explained in considerable detail the way in which the child tax allowances were to be phased for students still in full-time education on 31st December last year and how this would be worked out for the coming year. As I understand it, that process will need to be repeated. This is because the levels of grant, especially when they are discretionary from the local authorities, are likely to be changed. So we are not coming to the end of the road in simplifying the situation for parents of students over 19.
There will be great difficulties, particularly next year, when we come to the second deduction in the tax allowances. Then, we hope, the child benefit will become more the real benefit that it is intended to be. I hope that shortly we shall clarify the matter, so that parents are looking not simply 12 months ahead when thinking of the support that they will need to give to their offspring, but a little further than that, in the light of guidance given by the Treasury.
There is another issue involved in the child benefit being a benefit as of right. It is what we do about increases in costs paid by families that are not well off. The child benefit will be more than offset by the increase in the cost of school

meals that is to follow this September. Adjustments are being made, but if the changes in the tax-free child benefit are not to occur until April 1978, families will have been grappling with increases in the cost of school meals for about seven months, and those increases will be far greater than the child benefit.
This, too, is a matter that has been insufficiently discussed by local authorities, the Department of the Environment, which is responsible for the budgeting of local authorities, and the Treasury. Many low-paid families will be in great difficulty because of the increase in school meal costs.
There are many benefits that interact with the tax-free child benefit. If we are to do what the Committee would wish, which is to ensure that a start is made and the still outstanding difficulties are ironed out, we must look to eventual simplification of the scheme. I repeat the words of my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) when he asked the Government to consider again a unit system that would make any further changes not a nightmare for the staff involved but a matter of simple adaptation as time goes on and the benefit becomes part of a real child credit scheme.
It is easy to understand why the right hon. Member for Blackburn protested too much. The right hon. Lady feels passionately on these matters and we understand and welcome the constant spurring that she is giving the Government Front Bench and also the thinking that she is encouraging to take place in other quarters as a result of her efforts. However, there is one thing that must be said from both Front Benches—namely, that we cannot make identical the conditions of child tax allowances and child benefit, tax free as it is. There will be problems such as the one that I have outlined.
We should be seeking to reach a tax credit position in which no one is worse off and some people—for example, those who are poorer—are better off than those who can afford to make small sacrifices. That is not to say that we should be penalising those who have made the effort. It has always been part of the Conservative case that we should ensure that those who make greater work effort should retain a greater proportion of their


earnings. That is what the tax debate is all about.
We say that it is high time that the clause made its appearance. It is not all that we would wish it to be. This is not because of anything that happened during 1970–73 but because we have suffered such mammoth inflation over the past three years. We know that inflation has harmed families most, especially those with many children. The clause may begin to help but it is a tiny drop in the ocean of increased prices and the general burden that families have had to bear under the past three years of Labour Government.

Mr. Robert Sheldon: The hon. Member for Wallasey (Mrs. Chalker) is pleased that on this occasion at least the Treasury is involved in child benefits. I understand the hon. Lady's concern, because in the case of many others who see the hand of the Treasury behind the control of expenditure, there is frequently a misapprehension about the rôle of the Treasury.
The main task of the Treasury in these matters—the right hon. Member for Wan-stead and Woodford (Mr. Jenkin) might understand this better—is not to determine levels of expenditure bat to ensure that they fit in with the decisions taken by the Cabinet.
When my right hon. Friend the Member for Blackburn (Mrs. Castle)—she has unrivalled experience in these matters—went into the problems of the family support systems that we have examined, she mentioned the increased level of resources that needs to be found. We can treat that comment only with the greatest respect and hope that it will be possible to meet her objectives and the objectives of many others of those who take part in these debates.
I know your strictures, Sir Myer, on mentioning the question of increases in child benefits. I think that I can more easily comply with your demands, partly because I do not have responsibility for dealing with the question of increases and also because these matters were raised in Question Time today. It is obvious that even though I desired to do so I should be unable to go beyond what the Secretary of State said this afternoon on this matter.
The right hon. Member for Wanstead and Woodford spoke a great deal about past matters. My right hon. Friend the Member for Blackburn said that she was not concerned with the past but with the future. The right hon. Gentleman previously suggested a scheme in connection with child benefits, and I recall that he advanced another scheme in respect of petroleum revenue tax. The right hon. Gentleman is fond of introducing schemes. He must beware of the excessive pride of parentage that can make one too devoted to schemes that may be reasonably satisfactory or useful as a basis for argument but that are not the only way of looking at matters.

Mr. Patrick Senkin: The Minister is probably right to chide me about excessive pride in the parentage of schemes, but I have always regarded it as part of the duties of an Opposition to be constructive as well as critical. I like to be able to answer the question "What would you have done, chum?" On both the petroleum revenue tax and on this provision, I have done my best to answer that question. I have told the Government what they should have done. In both cases they would have been much wiser to take my advice.

Mr. Sheldon: I am glad to see the confidence that the right hon. Gentleman retains in schemes that did not see the light of day. One can be a little overenthusiastic about devices that one thinks up oneself and a little more objective about those thought up by somebody else. I do not deny the right hon. Gentleman's interest and involvement in these matters, and I have some admiration for him on that score, but I am seeking to point out the penalties that come from over-enthusiasm for schemes that one devises oneself, since one does not look upon them as critically as one would examine other schemes.
The right hon. Gentleman asked how many one-child families have not claimed child benefit. He will know that they have had 12 months in which to claim. I am informed, although this matter is not within my own responsibility, that only 3 per cent. of one-child families, eligible have not claimed child benefit.

Mr. Patrick Senkin: Is it 3 per cent. of one-child families, or 3 per cent. of all families?

Mr. Sheldon: The figure is 3 per cent. of all families. I am sorry if I did not make that clear.
The right hon. Gentleman also pointed out the advantage for families in tax-free child benefit. He suggested that there was no comparable advantage available to those drawing national insurance benefits. He then dealt with the point about the problem of short-term benefits being tax-free and leading to a double disadvantage. The main problem is that we as a Government believe that the administrative problem of the taxation of short-term benefits is a matter that no Government will readily be able to accept. Those are the difficulties that face us.
I think that we are right to have started the child benefit scheme and to try to phase it in in a way that produces the least disruption to those concerned. I appreciate that anxieties of those who would wish to see it implemented over a shorter period of time, but we must pay attention to the representations made on behalf of industry, among others. Although this has led to a much more complicated form, it is the right way to handle it.

Mr. Peter Bottomley: When the Financial Secretary speaks of representations from industry, what does he mean? Did the CBI and the TUC come forward? Did the right hon. Gentleman get a wave of letters from people?

1.0 a.m.

Mr. Sheldon: I thought it was general knowledge that the Labour Party-TUC committee that met on this matter expressed its anxieties. Those anxieties came from various sources, including industry. I do not say that the whole of industry made representations, but representations were certainly received from industry.
These provisions will be implemented over the three-year period starting April 1977 and this is only the first stage. A number of matters have yet to be decided.
My right hon. Friend the Member for Blackburn dealt with one of the most important points when she condemned some of the criticism that we heard from the Conservatives. She pointed out quite fairly that the child benefit is a reality. The tax credit scheme was a dream.
I am aware of the expansionary conditions of the time when the Conservatives

first formed their ideas, but since then there have been substantial changes in the views of that party's Front Bench. That has some connection with the control of public expenditure, which the Conservatives believe is too high. They have spoken of the need to cut public expenditure, and I have not heard the right hon. Member for Wanstead and Woodford refute that. I am sure that their scheme would have been a prime candidate for such treatment.

Mr. Patrick Jenkin: Does the right hon. Gentleman realise that another major event since the Select Committee reported is that the real value of tax thresholds has been very sharply reduced and that therefore the cost of converting the tax allowance into a tax credit is very much smaller than it was at the time of the Green Paper and the Select Committee? Therefore, the Minister's arguments that it was £1,300 million and is now £5,000 million is so wide of the mark as to be ludicrous. The cost of introducing tax credits now will be much less, in real terms, than it was then.

Mr. Sheldon: I cannot believe that the right hon. Gentleman, if he ever had the chance of bringing in a scheme that would cost several thousand million pounds—[Interruption.] The old scheme was to have cost £1,500 million, and that figure is not likely to have been much reduced. In the debates in the Select Committee we were talking in terms of thousands of millions, and it would cost that much to introduce the scheme now.
I note the right hon. Gentleman's disclaimer on this matter. I note, too, the figure that we have been able to put on the scheme. Perhaps these matters could be debated at greater length. But the right hon. Gentleman must accept this point. At a time when the Conservatives are anxious to cut public expenditure, when their economic spokesmen have spoken of the need for a cut in transfer payments. it would have been astonishing if this scheme had not been a prime example of something that needed to be cut, or, indeed, of something that did not need to be introduced. It is against that background that we should see the Government's achievements, of which, in this field and many others, I am proud.

Question put and agreed to.

Clause 21 ordered to stand part of the Bill.

To report progress and ask leave to sit again.—[Mr. Tinn.]

Committee report progress: to sit again this day.

CHARTIST COTTAGES, DODFORD

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Tinn.]

1.7 a.m.

Mr. Hal Miller: It is with a sense of profound relief that I am able to place before the House and the Government tonight questions arising out of the listing of six Chartist cottages at Dodford in my constituency as buildings of historic and architectural importance.
As far as I have been able to trace, the affairs of Dodford last came before the House in 1848, when the affairs of the National Land Company were the subject of examination by a committee of inquiry, and subsequently, in 1857, with the passing of Acts for the winding-up of that company, which was concerned with the purchase of an estate at Dodford for settlement by the Chartists under the leadership of Fergus O'Connor, who promoted that company and was the leader of what is known as the Chartist movement.
Dodford was the last of three settlements built to the same design. I summarise briefly. The houses comprised two bedrooms, one store room, one sitting room and one kitchen, which included a pump and a well inside the building.
I wish that I had been able to take advantage of the Minister's presence in the West Midlands today to take him to Dodford so that he could see for himself the attractions of the area and the beauty of the surroundings. I hope that he would not have been lulled into a false sense of security about the strength of character and feelings of the inhabitants of Dodford—and I can illustrate that point by remarking that it is the only area in my constituency where I have had a gun drawn on me while canvassing. I hope that the Minister will

not leave the House this morning with any doubt about hte resolution of the inhabitants of these Chartist cottages.
I come more up to date. Since the war the area has become liable to redevelopment and, of course, in such a favoured area plots of four acres in extent—which is what these cottages have—have become desirable properties. A number of the plots have been bought up and the original bungalows demolished. That is hardly surprising, since the cottages were built without solid floors or foundations, despite the clay nature of the soil, and the materials from which they were built have not managed to withstand the passage of more than 100 years. Many of the cottages are now in need of substantial repair and need the provision of amenities that are now expected, such as a bathroom and, indeed, an inside lavatory.
I should at this stage make reference to a valuable publication for those who are interested in this subject. It is "From Hamlet to Parish, the Story of Dodford, Worcestershire" by Miss Winifred Bond, whom it might have been possible for the Minister to engage in conversation had he visited the area today.
Following discussion in the parish council during the autumn of 1974 the area was designated a conservation area in August 1975. It was at that time suggested by the council that certain buildings in the area might be the subject of listing. Notices to that effect were served in December 1975 on the six cottages that are the subject of this debate. As far as I can see from the records—though it has not been clearly established—they were confirmed by the Secretary of State in May 1976, despite representations that I made just before that on behalf of the occupants of the cottages and following a well-attended meeting of the parish council that unanimously opposed the listing.
It is not my purpose to go over the procedure and manner of the listing and the serving of notices by the district council. There is grave doubt about the propriety with which that was carried out and it is the subject of a reference to the Commissioner for Local Government who is considering whether a formal investigation is required. My purpose is to deal with the consequences of the listing for


the residents and to raise the wider subject of how the community sees its responsibility in preserving benefits for itself at the expense of the individuals living in the listed buildings.
Of the 27 such cottages that remain substantially extant, according to Miss Bond's book, only six have been listed so there is an element of discrimination, which has been aggravated during the course of the events that I have recounted. One cottage that was in a much better state of repair and in a much more authentic condition was offered for sale to anyone interested in preserving it. It was subsequently demolished and a much larger building erected on the site. I trust that the Minister will therefore understand the vexed feelings of people who were already perturbed and troubled by the original listing that this neighbouring property should have been allowed to be demolished.
Apart from that discrimination, the occupiers of the six cottages have suffered injury because of the cost of repairs. The buildings are more than 100 years old and were built without foundations. Naturally there has been considerable settlement. When such a listed building has to be repaired, one must expect difficulties in finding replacement materials of the same type and same dimensions as those used originally.
An occupant of another cottage received an estimate following his application to install a bathroom. The estimate for repairs was more than £10,000 and the House will readily appreciate the alarm that this caused to the inhabitants of the six listed cottages.
These inhabitants also fear that there has been a loss in the value of their properties, because they have seen other properties bought for development at favourable prices and they apprehend that there may not be such favourable prices for listed buildings that are subject to all the restrictions applying to such properties.
There has never been an attempt to consult local opinion, which showed itself solidly opposed to the listing. Because of the conservation order, the inhabitants naturally supposed that the exercise of planning controls and the requirements of the order would provide adequate protection. Correspondence continued unhelpfully

through the summer after I wrote to the Secretary of State in April 1976. I accompanied a delegation of residents to the Department on 29th November 1976, but it did not seem to receive a very clear reply and certainly I was unable to trace the response. Since then I have been seeking to raise this matter on the Adjournment.
I have tried to establish that these six cottagers feel that they have been the subject of discrimination. They feel that they have been most unjustly treated, that there was no consultation, and that adequate powers exist under the conservation order and the existing planning control, and they wish that the Secretary of State would reconsider the possibility of removing these orders.
There has been some discussion whether the Secretary of State has power to lift an order. As far as I can trace in the legislation, there is no question of there being a prohibition on the lifting of an order, and there are some grounds for supposing that the power to do so does exist, because the Secretary of State is able to give his consent to the demolition of a listed building. That would lead one to suppose that the listing order was lifted before the consent to demolish was given.
To alleviate the lively and real apprehensions of my constituents, I ask the Minister to give some indication how that situation is viewed and to say whether, in particular, he is able to substantiate the suggestion that has been made by the district council in writing that he would consider favourably an application for demolition if it could be shown that restoration was an uneconomic or impracticable proposition. That has never been substantiated to the satisfaction or the relief of my constituents.
I should like the Minister to address himself to the wider question whether it is appropriate that when such buildings are listed and preserved for the wider benefit of the community the entire cost and consequences of such a listing should fall solely on the shoulders of the occupants of the cottages.
I might at this stage perhaps mention that in two of the cases those concerned are direct descendants of the original inhabitants, and therefore they have preserved unbroken the link going back to


the very beginning of this enterprise which, as I said, was last brought to the attention of the House in 1857.

1.18 a.m.

The Under-Secretary of State for the Environment (Mr. Kenneth Marks): I am indebted to the hon. Member for Bromsgrove and Redditch (Mr. Miller) for bringing these events before the House. There is another link between us in this matter, in that not only did we both go to the West Midlands today, the hon. Gentleman to his constituency and I to Coventry, but the Chartists had a great deal to do in the area that I represent. Indeed, the great Chartist poet, Ernest Jones, was buried in what eventually became the playing fields of the school at which I taught.
I hope that the hon. Gentleman is not too disposed to suggest that a few people have been selected for arbitrary and callous treatment by a local authority and departmental machine. I want to take the opportunity to demonstrate to the hon. Gentleman that in its actions my Department has been carrying out the wishes of the House in the proposals made for listing.
Under Section 54 of the Town and Country Planning Act 1971, the Secretary of State has a duty to compile a list of buildings of special architectural or historic interest. The purpose of this list is to offer guidance to local authorities in framing their planning policies and development plans. Effectively, the list indicates those buildings whose future should be carefully and formally weighed if there is ever a question whether they should be demolished or changed in any major way.
My right hon. Friend and his predecessors have had this responsibility since 1947, and the whole country has been surveyed once to produce a statutory list of buildings of special interest for each local authority area
In deciding what criteria should be followed in the selection of buildings for listing, my right hon. Friend is required to take appropriate advice, and in practice he looks to the Historic Buildings Council, his statutory adviser on the matter, to provide this. It recommends the criteria, which have been accepted

and published, and which are followed by the Department's professional investigators in selecting the buildings to be listed.
The first survey was completed in 1968, but, reflecting the public's growing concern for the numbers of familiar buildings that were being destroyed and the revised assessments of what was accepted as architecturally or historically important, the Historic Buildings Council recommended that the listing criteria should be brought into line with current standards. Its advice was accepted, and at present the statutory lists are being systematically revised. About one-third of the local authority area lists are now up to date. The full revision programme is expected to take another 10 to 15 years to complete.
In the usual way an investigator from the Department will visit an area that is to be resurveyed, get what information he can from the local authority and local amenity groups, and then assess the buildings in accordance with the accepted criteria. He will usually be able to assess the building externally and will not need to go inside or trouble the owner.
If, following his advice, it is concluded that a building is of special architectural or historic merit—and my right hon. Friend can take account only of those two factors—it will be included in the revised list and published in due course.
I should like to emphasise here at this stage only the building's architectural or historic merit is in question. The condition of the building, the means of its owner, and the qeustion whether it is in the way of a proposed redevelopment, are not relevant to the decision whether it should be included in the list, although, of course, factors like these could be highly relevant if there were to be a subsequent proposal to demolish or change the building.
This is the way buildings are usually included in the statutory lists, and the greater part of the 15,000 or so buildings which are now being added to the lists each year are dealt with in this way. The resurvey is a slow process, however, and the Department relies on the help of local authorities and others to let it know about buildings which may be of architectural or historic merit in areas which may not be resurveyed for some time.
Where a building is threatened with demolition, or an urgent assessment of its area or historic merit is requested, the Department of the Environment operates an emergency listing process. Here an urgent assessment can be made of a building, and if it merits inclusion in the lists it is quickly added and the local authority is informed at once and asked, as the law requires, to inform the owner that his building has been listed.
The Department also sends an informal letter to the occupier telling him or her of the listing. Many of these emergency or spot listings are in response to requests from local authorities who ask that buildings that have been recommended for listing in the normal resurvey process should be formally listed in advance of the publication of the complete list.
The other broad way in which buildings are listed, and the one that was used for the Chartist cottages at Dodford, in the hon. Member's constituency, is by means of a building preservation notice. All local planning authorities may issue such a notice in respect of a threatened building not included in the list. The effect of this notice is to give the building the same protection afforded by normal listing—it cannot be demolished or altered significantly without listed building consent. The notice is effective for six months, enabling my right hon. Friend to decide within that time whether or not he should include the building in the list.
It is perhaps necessary to mention here one other way in which buildings can be afforded the same protection as if they were listed buildings. Under the Town and Country Amenity Act 1974 unlisted buildings in designated conservation areas cannot be demolished or significantly altered without formal listed building consent.
The designation of a conservation area itself has, therefore, much the same effect as if all the buildings within the bounds of the conservation area were listed. The cottages at Dodford are within the Dodford conservation area and, indeed, form its nucleus.
In March 1976 the Bromsgrove District Council served building preservation notices on the owners and occupiers of six of the Chartist cottages in Dodford and asked my right hon. Friend to consider

the buildings for inclusion in the statutory list.
The cottages form part of a settlement designed by the social reformer Fergus O'Connor as part of his scheme within the Chartist movement to settle working men on smallholdings. They thus form an extremely interesting and early attempt at social reform, particularly related to the depressed conditions of the latter 1840s, and my right hon. Friend concluded that they should be listed as being buildings of special historic interest, so the six cottages were included in the list on 12th May 1976.
I appreciate the hon. Member's concern for the fears of the occupiers when the building preservation notices were served. I can assure him and those concerned that the inclusion of their cottages in the statutory list does not itself mean that they must be preserved as they are now for all time, or that they cannot be adapted to meet modern living standards. The inclusion in the lists—and the same considerations apply to the remainder of the unlisted cottages in the conservation area—is a penalty only if the hon. Member insists on regarding it as a penalty, in that proposals to demolish or change the cottages in any significant way will require formal listed building consent. The local authority will usually be able to decide whether alterations can be permitted.
I might here say that this control does not extend to alterations made before the date of the issuing. Proposals to demolish a listed building have to be submitted to the local authority, which must advertise the application and notify the four national amenity societies concerned with historic buildings. If the local authority is minded to grant the application to demolish the building, it must inform my right hon. Friend, who may, if he so decides, call in the application and decide it himself—usually after a public inquiry.
The hon. Member may have in mind, in his conception of penalties, the powers available to the local authorities and to the Department to take action against the owner of a listed building who, as sometimes happens, deliberately neglects it and allows it to deteriorate. Section 101 of the Town and Country Planning Act 1971 empowers a local authority to effect emergency repairs on an unoccupied listed


building and to recover the costs from the owner. Section 115 of that Act enables a local authority to issue a repairs notice to the owner of a listed building. This notice must specify the repairs that are needed to maintain the building. If the repairs are not effected within a period of two months, the local authority can compulsorily acquire the building at its existing use value.
The owners of the Chartist cottages, however, need have no inordinate fear of the use of these powers. They have been used sparingly in the past and are usually revoked only when a building falls into extremely bad repair, such as might make the collapse of the building an immiment possibility. They are not likely to be used merely to ensure routine maintenance, and there is no intention that they should be considered as an immediate consequence of listing a building.
I hope that from this the hon. Gentleman will be able to convince his constituents that they are worrying unneecessarily about the effects of the listing. I think that he will know that a senior officer of the Department has visited some of the owners concerned and has discussed their fears with the chief executive of Bromsgrove District Council. The chief executive has undertaken, as far as he is able, to ensure that the district council adopts a sympathetic and helpful attitude to the occupiers of the cottages. I note that the hon. Gentleman has asked the Ombudsman, the Commissioner for Local Government, to investigate the local council's action.
The hon. Member also suggested that the Government, having listed the buildings, should make some financial contribution to help bring them up to the required standard. The Government do indeed help with grants for repairs to outstanding historic houses and towards projects undertaken to present and enhance the character of outstanding conservation areas. We expect to allocate, in grants this year, overe £4 million in this way, and a small amount has been allocated on the recommendation of the Historic Building Council to projects in the non-outstanding conservation areas. Local authorities may also make discretionary grants for the repair and maintenance

of historic buildings under the Local Authorities (Historic Buildings) Act 1962.
But this country has a rich architectural heritage, and the available money usually goes to the most outstanding projects. Central and local government expenditure is currently under scrutiny, but in the best of times it would not be feasible or appropriate to assist each and every owner of the nearly 250,000 buildings listed in this way.
The hon. Gentleman is under a misapprehension if he considers that the inclusion of a building in the statutory list means that money must immediately be spent on bringing it up to some specified standard. Where the listed buildings are modest dwellings, as at Dodford, it would be quite unreasonable to expect standards greater than their occupants would strive towards if they were not living in listed buildings. The listing itself puts a marker on a building and asks that the owner, local authority and central Government treat its claim to survive with care. It does not mean that it should take on the attributes of an ideal home or showplace.
I shall examine the point made by the hon. Gentleman about improvement grants and the heavy demands that have been made by the local authority.
The hon. Gentleman referred to a deputation that he brought to the Department at the end of November, to which there had been no reply. I understand that on 13th December my noble Friend Baroness Birk wrote a detailed reply to the petition that was presented on that occasion. I shall certainly send him a copy of that letter of several months ago.
As I indicated earlier, I am glad of this opportunity to deal with several apparent misconceptions about the way that buildings are selected for listing and why we list them. This country has a good record in conserving its historic buildings, and an adequate inventory is a basic element in helping us to conserve them. I trust the cottagers at Dodford can in future regard their historic houses as rather more than an oppressive burden.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Two o'clock.